> but anything outside of a salary for compensation is just a bad idea.
In the hedge fund industry, you can't be a successful firm without a bonus compensation model.
- The profit is usual attributable exactly to specific people. If they don't get paid their share of what they brought in, they'll quit and go elsewhere where they can be paid their share, and you'll be left with all the worst people.
- Some years are successful, and others aren't, meaning you can't have a stable high salary, since that will risk bankruptcy in unsuccessful years. You could adjust salary up and down each year, but that's no different to having a bonus.
In a "normal" company where revenue is stable over time and each person's contribution isn't so easily quantifiable, I can see your point.
> If they don't get paid their share of what they brought in, they'll quit and go elsewhere where they can be paid their share, and you'll be left with all the worst people.
You are selecting for lucky people that way not competent.
To a large extent I agree. It'll come down to the type of strat they're running. If it's a very short holding period, performance is more correlated with skill, and the bonus should therefore be more correlated with individual performance.
- The profit is usual attributable exactly to specific people. If they don't get paid their share of what they brought in, they'll quit and go elsewhere where they can be paid their share, and you'll be left with all the worst people.
- Some years are successful, and others aren't, meaning you can't have a stable high salary, since that will risk bankruptcy in unsuccessful years. You could adjust salary up and down each year, but that's no different to having a bonus.
In a "normal" company where revenue is stable over time and each person's contribution isn't so easily quantifiable, I can see your point.