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The Court of Appeal, still relatively unaccustomed to wading into the City's high-risk, high-reward culture, yesterday labelled the Mouradian case "a hoot".

A hoot?

[Tradition broker Alexandre Mouradian] managed a team of seven employees and one consultant at the firm at the time of his claim, trading futures and options on various exchanges around the world. Under his contract, his desk was entitled to split a bonus pool equal to 60 per cent of the desk's net billed income, awarded on a twice-yearly basis.

Mr Mouradian says he was the sole and final arbiter of how that pool was to be divvied up without any input from Tradition's senior executives. In fact, documents submitted to the court show that out of a total pool of £1.43m for the second half of 2006, Mr Mouradian apportioned £1.32m - or 92 per cent - for himself.

Two junior employees were awarded payments of £60,000 and £47,000, while another received £2,000. The other members of his team received nothing, according to court documents.

He sounds like a real prince among men. What's he doing at the Court of Appeal anyway?

Mr Mouradian is now seeking a further £92,571 he says was improperly deducted from the pool before any bonuses were paid out,

This is via Felix Salmon, who comments: "Inter-dealer brokers, remember, take no risk, use no capital, and have no positions. Their job is nothing but matching buyers and sellers, who then transact between each other.
What's more, Mouradian wasn't even running the CDS desk -- the really illiquid market where demand for brokers is greatest. He was in charge of exchange-traded options -- exchange-traded, as in, you don't even need to use a broker at all, if you don't want to. Maybe he was just really, really, really good at taking traders out on the town and persuading them to go through him whenever they wanted to trade."

He's not quite right when he says that brokers like Mouradian take no risk, though: they do risk giving in to the temptation to take their employers to court and be ridiculed in the national press.

The case reminds me of a classic experiment into our sense of fairness, the Ultimatum Game. Two players, Alice and Bob, are given a sum of money - say £50. Alice gets to decide how to divide it between them. Bob can either accept Alice's division, or reject it - in which case neither Alice nor Bob get anything.
Naive economic reasoning says that Alice should keep as much as she can, and Bob should accept whatever he's given. Even if Alice decides to give him £1 and keep £49, Bob's payoff is still better than the alternative - if he rejects the offer, he gets nothing.
But that isn't what happens when the experiment is run: in fact, Alice normally splits the money far more evenly, often 50:50, and Bob tends to reject any offer that gives him less than £10. It's worth a little loss to enforce your own vision of justice.

Of course, the rest of Mouradian's team didn't have the option of rejecting his proposal - at best, they could have resigned. But perhaps Ultimatum Games are something for the regulators to think about as they contemplate overhauling compensation schemes. Wouldn't that make the bonus season interesting?