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March 1, 2003

Dealers Compensation Plan for Bearish Times

By Staff Reports

One of the Street's most entrepreneurial trading firms is putting its research salesmen on a commission package.

The move will align the interests of the research, sales and trading teams at Jefferies & Co., the equity trading firm noted for compensating most other pros strictly on production.

The firm's some 40 research sales pros will no longer earn a salary plus a bonus. Instead, the sales pros will keep up to 30 percent of the commission on the business they generate.

The move is said to have been well received among the troops at Jefferies since it gives the sales team more control over their earning power. For management, it should act as a powerful tool in its efforts to motivate producers, according to outside observers. John Shaw, Jefferies' president, has cited his firm's variable compensation package as one reason why his operation was able to add traders in the midst of a market downturn.

He says salary and bonus don't work for firms in a bear market. "It can crush a business," he told Traders Magazine.