Curious Cat Management Improvement Blog: Deming, lean thinking, innovation, customer focus, continual improvement, six sigma.
March 24, 2008
Losses Covered Up to Protect Bonuses

Does it surprise you to learn traders would cover up losses to protect bonuses? It shouldn’t, it happens over and over. Would it surprise you that almost any bonus (or quota) scheme increases the odds that the data will be doctored to meet the goals? It shouldn’t. Intelligent measures to make such doctoring difficult can help reduce the practice. But it is a likely risk of any such goal. As we have quoted Brian Joiner as saying: there are: “3 ways to improve the figures: distort the data, distort the system and improve the system. Improving the system is the most difficult.” So it is no shock that distorting the data is often the tacit people use (especially when the rewards are great or the punishment for missing is severe).

Of course the people that take unethical or illegal action are responsible for their actions. But managers that set up poor systems and then get poor results should not be surprised. You mainly read about the exciting distortion of data – but there is much more such distortion that doesn’t seem interesting enough for the press.

Traders at top investment bank ‘covered up losses to protect their bonuses in £1.4 bn scam’

A top investment bank said yesterday that some of its traders had tried to protect their massive bonuses with a £1.4billion scam. Credit Suisse was forced to admit it will pay the price for the traders’ ruthless scheming by sinking into the red. All the traders involved – some of them based in London – have been fired or suspended.

Shares in the bank, which is based in Zurich, tumbled 7.5 per cent yesterday. Credit Suisse admitted it had discovered intentional “pricing errors” by a small number of traders involved in complex investments linked to the mortgage market.

Related: Problems with BonusesBe Careful What You MeasureMeasuring and Managing Performance in OrganizationsAnother Quota Failure Example

5 Responses to “Losses Covered Up to Protect Bonuses”

  1. If you can’t distort the data, just don’t look at it « Process Rants Says:

    [...] the data, just don’t look at it A sad reminder of the state of affairs comes from Curious Cat Management when it comes to conflicts of interest between the data and one’s own goals.  It is [...]

  2. Curious Cat Investing Blog: More on Failed Executives Says:

    It is sad to see the same story repeated over and over. Give people the change for obscene bonuses. They make up claims that they are making lots of money to get bonuses but actually set the company to go bankrupt…

  3. CuriousCat: Restaurant Eliminates Tipping to Improve System Performance Says:

    This is an interesting article discussing some of the psychological and systems thinking aspects of managing a system made up of people…

  4. What the Bailout and Stimulus Are and Are Not at Curious Cat Investing and Economics Blog Says:

    [...] is because they never actually provided the value they claimed. They merely created false returns to claim they provided a benefit to justify obscene pay (many of them truly didn’t understand this is what they were doing so beyond failing they [...]

  5. Curious Cat Management Improvement Blog » Why Congress Won’t Investigate Wall Street Says:

    The failures of the political leaders (putting their donors interests above the public interest) is something that should be investigated…

Leave a Reply


Curious Cat Management Improvement Blog © curiouscat.com 2005-2010

Internal Links

Author

John Hunter

Tags

Bill Hunter blogs Books Career Carnival cars commentary Creativity curiouscat Customer focus Data Deming Economics economy engineering executive pay Google Health care Innovation internet Investing IT Japan John Hunter lean manufacturing Lean thinking Madison management managing people Manufacturing overpaid executives Performance Appraisal Process improvement Psychology Quality tools quote respect for people Six sigma Software Development Statistics Systems thinking tips Toyota Toyota Production System (TPS) webcast
Full tag could

Other

Search Blog

Web Search

Management Improvement web search

Recent Comments

  • Nick McCormick: Agreed John. Slogans can be good or bad. They can be effective if the rank and file come up with...
  • Halvard: I have reservations about the Obama Healthcare Plan. Can it create costly effects to my families well being?...
  • Rob: Absolutely excellent videos. Deming is timeless and his message resonates today.
  • Jamie Flinchbaugh: I am curious to watch it. I believe the executives will probably have some ah-has and some good...
  • Jamie Flinchbaugh: Thanks for including me. I’m glad you choose Fail, Learn, Lead. I think it’s a really...
  • ilskan: @Kyle: I suppose so. Ideally you want a happy medium, though; the other end of the spectrum can be pretty...
  • Anonymous: I recently stayed in a ski lodge in the white mountains Arizona for me and the wife’s anniversary....
  • Jamie Flinchbaugh: I’m sure you are right that there are many frustrated people, but one of the benefits of...
  • Karen Wilhelm: Great find – lean starters in need of do-it-yourself training curriculum can really benefit from...
  • Mark Graban: Nice post, John. I’ll hold out hope that this is more than a form of industrial tourism. Executive...

Archives

March 2008
M T W T F S S
« Feb   Apr »
 12
3456789
10111213141516
17181920212223
24252627282930
31