Trader A makes $10m in year 1 and gets a $1m bonus. She loses $10m in year 2, and gets no bonus so the firm is down her $1m bonus. Trader B makes $1m in years

Trader A makes $10m in year 1 and gets a $1m bonus. She loses $10m in year 2, and gets no bonus so the firm is down her $1m bonus. Trader B makes $1m in years 1 and 2. That’s too low to trigger a bonus, but his firm is up $2m. The system doesn’t reward trader B so he has to choose: do what’s right for the firm, or take big risks in the hope of a bonus (Simplifying dramatically)