De-perversing incentives

Under the plan, Morgan Stanley will withhold a portion of its employees’ bonuses for three years. If a worker’s bets on the markets go wrong during that time, some of the bonus will not be paid. The so-called claw-back provision is intended to discourage employees from making short-sighted decisions by tying their compensation to the bank’s long-term performance.

Seems like a good idea. However, it may disincent top talent from going to MS, or staying, if they can get paid better elsewhere.