Matthew Lynn over at Bloomberg has come up with one of the most ridiculous suggestions that I’ve ever seen pondered in a major publication! He opines that we should make the bankers give back their bonuses from prior years due to losses that these guys incurred over 2007. Now, on the face of it, one can make an argument that sounds plausible, and he’s done somewhat of a good job of it.

However, I still think he’s out of his mind. Let’s see…

What makes the investment bank so different than any other business? If the CEO of any small company that was funded with VC money loses a couple of books, he/she should give it back! What happens if they didn’t make money in prior years? Then it’s ok?

Let’s face it, employee compensation is a tough nut to crack and granted, there are certain businesses such as hedge funds, that do have high water marks. However, those are situations where they are pure traders (unlike the typical investment bank) and they are not required to give back profit. They must hit the high water mark, to receive additional compensation.

When it comes to the investment bank, the majority of these guys are tied to restricted stock units and/or options based on their performance. I guess you can always create a negative incentive structure to push them out the door, but where exactly will that get you…?

A. To the headhunter where you will find someone looking for the positive incentive structure that actually works.