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Comment by danpalmer | Hacker News Reader

Bonuses are often calculated months in advance, and employees are also normally told about them weeks or more before they are paid (they're often even in contracts).

Despite the guy on Twitter calling the SVB issues in January, and arguably long term mismanagement that led to the downfall, the actual issues happened rapidly, over a matter of days.

These just didn't happen on the same time scale, and bonuses can't be undone in a matter of days with employees expecting them and even contracts demanding them.

There's a lot of reasonable takes on this whole terrible situation, but implying or suggesting that the bonus payouts were part of it or that employees are to blame for taking them is a terrible take.

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>These just didn't happen on the same time scale, and bonuses can't be undone in a matter of days with employees expecting them and even contracts demanding them.

Exactly.

Only withdrawals by account holders, regular bank employee salaries, and corporate salaries depending on the bank can be undone in a matter of minutes. Never executive bonuses.

Sure they could. To put it in perspective, thousands of companies are unable to pay their employees and vendors this week due to the SVB collapse.

It does not seem unreasonable that SVB employee bonuses for "great job done in 2022" should have been delayed given the clear evidence on Thursday that the bank was imploding.

The perspective is not lost on me, I just think it's completely unrealistic on multiple fronts: it's a tiny fraction of the money, it's executed on a very different timeline and potentially not possible to stop (certainly not easy, HR may not even talk to treasury), and it may be against their contracts.

In jobs like this bonuses are also not just "great job" money, they're a predictable part of compensation that people depend on.

Sorry but it’s as simple as a directive to the person who clicks “Pay Now” to not do that yet.

A predictable part of compensation is being paid your regular wage on time and for many clients of SVB this is probably not possible this week coming.

They should have halted the bonuses.

It's not always that simple. Making several thousand payments totalling as much as $100m is not "clicking a button". The process of making those transfers could be days or even weeks long. Payroll processes and the actual transacting involved typically take at least a few days.

I clicked that "Pay Now" button in my business. Nothing really that complex there, once the amounts are calculated (usually by automated programs). The rest is just regular ACH transfers, which take 2 business days to clear.

> process of making those transfers could be days or even weeks long

Every payroll processor worth their salt has a big red abort button. Worst case: funds hit flagged and are then reversed.

Screw that. If the recipient of the bonus is CXO level or higher, I’d say the government has a duty to claw back this money.

For that I would agree! They're directly responsible for this mess.

However almost every bonus is not a CXO bonus, and I think clawing those back would be the wrong decision, and could be quite harmful to many.

Why?

No reason at all, obviously after bankruptcy is declared contractual obligations to pay mean nothing until the courts decide on what they mean ... which is never 100%.

Yeah. HR had most likely started the final bonus payout process before they knew about the bank's situation. This was just a coincidence of timing.

This surely takes "charitable intepretation" to a whole new level!

Since the article itself states that the payout of the bonuses was scheduled for March 10th in advance of the current situation it doesn't seem to.

I got my bonus for 2022 paid out on March 3rd. Everyone in my company knew the bonus payout date months ago.

It always is a coincidence isn’t it. Isn’t that unfortunate.

> and it may be against their contracts

Those contracts are with a company that doesn’t exist anymore… so I’m not sure that’s a good argument.

I get that this is part of the compensation that people rely on (I’ve seen Christmas Vacation), but it’s a really bad look. Paying out bonuses right before your company is taken over by the Feds is a horrible PR image. Regardless of if it is the right thing to do or not.

>Those contracts are with a company that doesn’t exist anymore

the company existed when the payment was made though, so why would your comment anything at the time of the payouts?

I appreciate the complexity of the unwind, and that many employees may not have had a direct hand in the risk that SVB accrued, but I think there's a bigger picture at play.

Banks are supposed to be one of the bedrocks upon which the economy rests and they are given certain privileges (like access to low interest rates ordinary people cannot get) as part of that role. Its clear the financial sector needs to have an extremely close eye on it to not cause all sorts of destruction across the economy, which it still manages to do pretty regularly out of a fun mix of short-termism, stupidity, and greed.

So from a signaling perspective, if the org is sitting on a lot of risk and employees may have benefitted during the accrual of that risk, shouldn't they also face consequences? Wouldn't that cause each employee in a bank to pay some more attention to the fundamentals of the org, to put pressure on any situation where large risk accrual happens? Wouldn't that cause the internal structure of banks to change so that more eyes were on these large risk accrual moments, because talented people wouldn't join unless they knew their livelihoods weren't at risk by one bad decision? Regulations can't be the only form of pressure for banks to not fuck up.

This might be the best comment regarding the financial system i have read to date.

In the U.S. there used to be a system called "double liability" where bank shareholders could be assessed up to the par value of their stock for money needed to make depositors whole in the event of a failure.

> I just think it's completely unrealistic on multiple fronts:

Somehow, it's always unrealistic, and somehow, these scenarios always repeat.

> it's a tiny fraction of the money,

No, allowing people to steal is a moral hazard no matter how much money it is.

Suppose I steal a $1000 TV from WalMart, and use the argument that this is a tiny fraction of their profits. No one would buy that.

So why should we buy that when it's orders of magnitude more money?

> HR may not even talk to treasury.

HR, especially in places where they don’t talk to treasury, may have the power to request for payments to be made but they aren’t likely to have the ability to approve or authorize payments.

"in retrospect, we have significant doubts about the job you did in 2022".

The notion that bankers who make large sums by constantly projecting and promising safety and risk mitigation shouldn't be losing their shirts when everything blows up just lays bare the truth. Everything is setup to protect the powerful and the wealthy, and out of everyone it's probably going to be 401ks, taxpayers, and small businesses to get hurt the most.

Lots of people far wealthier than those bankers who will lose money here.

> Everything is setup to protect the powerful and the wealthy

What was it that judge said? If they were to go to prison it might affect them negatively.

> bonuses can't be undone in a matter of days with employees expecting them and even contracts demanding them

If the executives running payroll knew there was material risk of insolvency, this is fraudulent conveyance and could (and should) be flawed back. Those employees’ claims then go into the stack with other creditors.

That said, the FDIC probably signed off on this because what will zero the value of the franchise is every employee who earned a bonus jumping ship over the weekend.

Material risk isn't insolvency. If anything, you run those payouts faster if the FDIC is making heavy breathing noises.

You might be right. It still looks bad for them.

Looks bad and is a captivating title for an article for the general public, but would the outcome change otherwise?

no mismanagement was weeks not days. When the FED change interest rates commercial Mortgage securities were hit and SVB had exposure to that financial product.

Since I hear a lot of people calling out the Fed, Let’s be perfectly clear about who is to blame.

SVB chose to invest in 10-year duration MBS that was yielding only 1.5% when higher rates were known to be just around the corner. The risk/reward in no way made sense.

Simple incompetence and/or greed.

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