February 3, 2009
What’s a “Malus”?
– Linda DeMelis, CompensationStandards.com
“Malus” is a new word being tossed around in executive compensation circles to mean “negative bonus.” At UBS, starting next year, only 1/3 of any cash bonus will be paid out in the year it is earned. The amount held in reserve can be reduced by a “malus” if results are poor.
A recent article in Business Week on reforming executive pay also referred to the “bonus / malus” system (as well as this DealBook article). I suspect the new word is someone’s attempt to combine the Latin word “malus” (evil or wicked) with “bonus” (which comes from the Latin word for good). We’ve seen nifty neologisms in the executive compensation area before – the immediately understandable “clawback” is a good example. It will be interesting to see if the more erudite “malus” catches on.