Wall Street Bonuses
The discretionary bonus is often the largest part of a Wall Street executive's compensation. Typically, the base salary for senior financial executives is small compared to their discretionary compensation. This can leave financial executives in a vulnerable position if they resign or get terminated before the distribution of bonuses. Departing executives frequently are denied their bonuses.
Wall Street firms usually deny the bonus on the ground that they have the discretion to do so. But this is not always true. If the bonus is an integral part of the executive's compensation, courts and arbitration panels will award the unpaid bonus to the executive. Companies do not have unfettered discretion to deny bonuses in certain situations. In fact, even if the parties have agreed that bonus payments are purely discretionary, courts and arbitrators will not allow blanket bonus denials if the decision appears arbitrary or irrational. Instead, courts look to the history of bonus payments and will apply the criteria used in the past to determine an appropriate bonus.
