Business Notes Wall Street

In an unusual advertisement-cum-apologia, Salomon Inc., parent of Wall Street's beleaguered Salomon Brothers, ran spreads in major newspapers last week that both touted its relatively reassuring third-quarter report and warned shareholders and employees alike of the struggle that remains. While the company set aside $200 million for expenses tied to the recent scandal and other suits, it helped pay for that reserve by eliminating $110 million that had been earmarked for employee bonuses in 1991.

"The fine performance of some people subsidized truly outsized rewards for others," read the ad, which was signed by interim chairman Warren Buffett. From now on, Salomon will have a "rational incentive plan" under which managers will get much of their compensation in stock, motivating them "to think like owners." In an industry seen as long past due for a correction of overgrown compensation, some other firms have taken a similar approach. Should the new tack at Salomon Inc. cause a wave of defections, Buffett (the Omaha investor whose Berkshire Hathaway holds 14% of Salomon) claims he will be undeterred. "We must have people to match our principles, not the reverse."