Bonuses and the credit crunch

Well, Alistair Darling has gone a bit further on City pay than Kitty Ussher was willing in his speech to the brothers in Brighton:

And that's why pay matters right across the board - in the private and the public sector - in the boardroom as much as on the shop-floor. You're rightly concerned about excessive bonuses - especially when people seem to get money for failing not succeeding. And that's got to change. A bonus should be for hard work, not big mistakes. Excessive bonuses, which encourage traders to take excessive risks, at a time of easy global credit - one of the major reasons for the global credit crunch. We need to learn the lessons to prevent this happening again.

So how to do it?