To not see the problem with bankers bonuses? Politics of envy?

[What1]

This is not a thread about a them read but I just read a comment which inspired me to ask ; why do so many people have a problem with bankers bonuses or the high salaries in the City? I mean, these are private institutions (nnot supported by the public ; except for the odd bank), so I just don't see why people think the salaries will affect them.

The way I see it, if they paid less and didn't give bonuses, then the shareholders would get to keep more to themselves and the general public don't benefit anyway (I may be wrong?)

It's just quite annoying reading all these comments which seem to stem from envy. So I have to ask ; why do you (oor people you know) have a problem with big bonuses and high salaries ; AIBU to not care about their salaries and be annoyed by these politics of envy?

TwofingerstoGideon - Actually, I do my job because I love it... I went back to uni in my 30s to do so. But I still wouldn't mind being paid millions to do it!!! I'm happy with what I get - if I wasn't, I'd do something else rather than whine about it.

And everyone bitching about people earning millions should perhaps look up the percentage of income tax revenues contributed by those people.

But I don't worry (get envious) about what other people get, I focus on me and my family...

Here is an example of one of the two largest Brooking Houses of its type in the world upping sticks and moving to a new territory because the tax policies are financially better for them.

In this case the UK benefited.

articles.chicagotribune.com/2012-01-14/business/ct-biz-0114-aon-moving--20120114_1_aon-center-aon-ceo-aon-corp

To think business will stick around when they can move to a more financially profitable territory is naive

Also not sure why anyone would have a problem with corporate entertainment. It happens in most industries and not just the financial sector. DH is in the import/export food sector and his taking one of his major and long term Asian suppliers to watch the final at Wimbledon. No one in the business will be surprised.

Building strong personal corporate relationships is actively encourage. It helps retain clients and attain new clients.

Hi What et al,

This is where I think the financial markets (and a lot of industries) have taken a severely wrong turn (and I worked in them for the majority of my career).

Firstly, what is the City there for? The purpose it to efficiently allocate capital and intermediate between investors and borrowers. It has singularly failed to do this. In the last 20-25 years, one would have been better off investing in gilts than the stock market. In the bubble years, the world was cabled with about 10 times as much optical fibre as would ever be needed, because of the valuations placed on .com stocks. More recently, we have seen the connivance between government and the City to steamroller vastly expensive, environmentally destructive and noisy wind turbines, pushing up everyone's electricity bills by 20-30%, at the same time as enriching a few land owners and investors in 'tax efficient' VCT schemes, where the government is effectively taking all the risk away. These are but two examples.

Ultimately, if one invests in the stock market, one should achieve a favourable return because one tolerates the income and capital value volatility. This is the ne plus ultra of capitalism; otherwise why should people invest in the stock market at all and how would firms raise money? What has happened instead is that 'end' investors (i.e most people) have been taken out of the equation and the decisions have been put in the hands of soi disant 'professional' investors. These investors have been paid 5-6 figure salaries but their expertise has been demonstrated as having been no better than a monkey throwing darts and choosing investments on that basis. More cynically, these decisions are heavily predicated on the advice of investment banks who are also advising the companies being invested in, albeit, in theory, behind 'chinese walls'. Any one with half an ounce of sense can see the problems in all of this, especially considering the revolving door of employees between all these institutions. I.E no one wants to shit on their own doorstep!

Finally, salaries are meant to efficiently allocate resources to employees depending on their value to the economy (over the long cycle). This has singularly failed to happen in finance. Many many top mathematicians and scientists are working on new financial 'products' rather than real world products to benefit society. This complete misallocation of resources has possibly been the most destructive of all, and also why the anglo saxon world is in hock to other less financial services dependent economies (Germany, for instance).

Ultimately this has become a self serving clique of FTSE 250 board members, bankers and advisors (City lawyers, management consultants et al). They are all on the same gravy train and no one is going to rock the boat. Yes, they pay tax but so would a road digger if we chose to pay them £500k per annum. Ultimately, though, tax is merely a reflection of a country's GDP and, if a country is not making anything really of value, it is mickey mouse money.

Thanks larry, that is very helpful
It's always nice to have people who actually know what they're talking about on these threads

larry has nailed it for me. I don't hate bankers, and don't like the lazy assumption that all bankers are wankers, but I equally resent any criticism being lazily dismissed as pure envy.

As I understand it (limited knowledge) even if a bank didn't get bailed out itself then it benefited massively from other bail outs because there were so many (badly understood) deals between all the banks ( for example Goldman Sachs and AIG).

As far as I know there has been no linked increase in performance to match the huge increase in salaries - in banks and for listed companies more generally.

OK, but then, you could, if you wanted to show a complete inability to think, start up a different thread entitled Military Dictators, Are they really all that bad?

I think people have a problem with corporate entertainment when its so lavish. Really? Are corporate deals really done over pimms at Glyndbourne, champers at Lords or strawberry and cream and Wimbledon? I've friends who got glasto glamping tickets through their large bank employer. All funded by the shareholder or Doris from down the street's pension "fees". I think many people see this as largesse and decadent.

Much of the city seems to work for the city it's self, not for the purpose that it is designed for to raise capital for investment. Sadly much of the business that goes on simply exists for the cities sake. Look up churning and see what it means for example.

I have no problem with bankers or some of the money they earn. I have issue with corporate decadence whilst taxes are avoided.

Oh and btw, "To think business will stick around when they can move to a more financially profitable territory is naive." To believe them when they say they will leave one of the world's major commercial centres is also naive. Didn't see them leaving Frankfurt when the EU capped bonuses did you?

Michael Lewis's 'Flashboys' is also an illuminating illustration of the finance business's contempt for ordinary investors.

I work in Finance, DH doesn't. He's more qualified than I am, works harder and longer. I'm not exactly on headline grabbing bonus levels but I do get handed 60%-80% of his annual wage as simply my bonus every year. I take it but I don't tell my friends what I earn, I'm embarassed and I don't feel it's justified. I consider my salary to pretty generous considering what I have to do for it (150% of DH's in his more intensive role). I know there are plenty of intensive stressful finance jobs but that's the same in every profession. I must earn more than many A&E doctors and when I think my wage compared to a social worker's and what they have to do for it, it's mortifying.

But hey, we're all "wealth creators". Politics of envy, my arse. It's a shitty system of overpaid entitlement. If these institutions are making so much money they should just reduce their fees.

My reference to my salary is my base one - just worked out my total income last year was 230% of DH's. Ok if I was saving the whale but I'm really really not.

Another good read is "City Boy: Beer and loathing in the Square Mile

Upthread someone was blaming bankers for pushing up house prices. It's a global market and our GBP exchange rate is such that our house prices don't look so bad for people earning in dollars.

If you are serious about wanting to know, you could try reading something, to understand the perspective of people who challenge the wisdom of large bankers bonuses. A good place to start would be The Price of Inequality by Joseph Stieglitz. Not a difficult read, and although focused on america you will see all the main issues being played out here.

Yes, it's a global market and the people most likely to be able to take advantage of that are those who've made a lot of money in financial services, or by owning/running/starting up a business which has done well thanks to the support of people in financial services. I doubt it's teachers and nurses earning in dollars who are buying all the new flats in London.

I have FAR more of an issue with footballers million pounds a week salaries and garde it is politics of envy...if you curb bonuses/put up higher tax band you are also slashing ambition/hope/inspiration and a drive to succeed and also be rewarded with a great salary at the end of it.

He is not one of the bankers who is tarred with causing the financial crisis. He is in fact working to get the bailed out Lloyds out of public ownership.

his bank collapsed and needed public money to stay afloat. Then he got a big bonus.

He earned that?

The City of London keeps the whole of the UK afloat. If the bonuses are within the law, changed after the financial crisis, and as a result of profit, then I don't see the problem. A lot of it is the politics of envy, of people being whipped into a frenzy by others and joining in to have a go.

I used to live in Edinburgh, a city which has the most under-performing, corrupt local authority imaginable. Its been going on for years. Just last week, another two contractors were convicted of taking bribes for awarding over-priced public contracts (www.edinburghnews.scotsman.com/news/crime/repairs-scandal-corrupt-council-staff-took-bribes-1-3770768)

Judging by the smiles on their faces, its been well worth their time to play at being the fall guys for a couple of years.

This city has actually passed a law allowing this corrupt local authority to run a business where it makes vast profits out of forcing homeowners to use their contractors to repair their properties. People are being faced with bills of tend and often hundreds of thousands each, which they often can't afford. Businesses have gone under, pensioners have had to sell up, and evidence is that much of the work is sub-standard, unnecessary and over-charged.

Yet the Scottish Government and the SNP, which are particularly verbose in criticising banker's bonuses, have never even debated it in the Scottish Parliament. Most MPs and councillors simply ignore their constituents when they write to them about it.

So that seems a fairly illogical state of play to me. Making money out of your employment with a private company versus making money out of fraud and corruption in public office and getting away with it?

I don't think bankers should be paid (such big) bonuses, and here is why:

There are several problems with rewarding bankers,
as already mentioned money is a powerful motivator.
So powerful that you end up with all kind of scandals with people being pressured to take products, miss sold products, over sold products, undersold products pressured to switch, charged and fined, etc. - that stuff was happening at branch level, with loans an PPI being sold to make up numbers by ordinary people who only got a couple of grand as a bonus!
it's the kind of pressure that make people do outright illegal things, like fixing market rates (e.g. LIBOR).

But worse, even if we say that was just a handful of bad eggs, when we talk about bankers here, we're not talking about the cashier, or even the manager at your local branch. we're talking about traders. people who deal with the stock and commodity markets. it's shown that in most cases even the best traders actually aren't that good, most investment funds, over time don't perform any better than the general market over time anyway. - in fact a lot of it is just luck.

So bonuses are actually just rewarding luck in a lot of cases.
If the system was fair, (e.g. if you do really well here's a bunch of money, but if you do really badly you pay it back) over a life time of trading, most traders would end up only with their standard wages.

Mintyy, your link to António Horta-Osório's pay packet (who arguably earned every penny for Lloyds) you linked to IS an example of sheer envy.
He is not one of the bankers who is tarred with causing the financial crisis. He is in fact working to get the bailed out Lloyds out of public ownership.

Regardless of who he is, does he really want, need or deserve that much?
If his "package" is 11.5 million, made up of 7.5 million in cash bonus, 3.6 million in shares that suggests his pay packet is almost half a million before any bonus.
What's that compared to a nurse/doctor/fireman, you know people who actually save lives?
and did he really deserve a bonus that was 29 times his wage? - you don't say to a doctor earning £60K "none of your patients have died this year so have an extra 1.7 million."

I don't really agree with 'politics of inequality' in the examples that have been used. Surely you can't expect a cleaner to earn as much as a CEO? Right?
No, of course not. but we're talking less than 1% CEO! 11.5 million for lloyds CEO, cleaner on minimum wage about 12k (if that?) about 0.1% is the CEO really a thousand times more valuable to the company than the cleaner?
It's not that I would say that executives aren't important. but, where I work, when the execs go on holiday, nobody really notices, if the cleaner takes a week off the effect is immediately apparent. nobody expects to earn a million pounds working as a cleaner... but the inequality is vast.
Compare the 11.5 million to the 12k full time cleaner wage it's a thousand times higher, compare it to a junior nurse (~23k), it's 500 time higher, compare that to a paramedic it's about 400 times higher, compare it to the home care people who are being told by executives to "clip" appointments having to pay for their own travel between appointments and not having that time counted so not even earning minimum wage for a full time job. do you really think that the lloyds executives are more than a thousand times more valuable to society than those carers? nobody expects these people to earn a million pounds a year, but these people won't earn a million pounds in their whole lifetime either.

So far people are saying it's bad that a cleaner might earn only 1% of a city bankers bonus, but the reality is it's a tenth of the most pessimistic estimates so far.
even those in "essential services" are earning a fifth of the most pessimistic guess for the disparity between the CEO we have figures for an a cleaner.

You don't have to be some sort of massive lefty socialist to say, erm, that's perhaps a bit wrong.

"The City of London keeps the whole of the UK afloat". Yes because the financial services contribution on 9.8% ( actually smaller than our much maligned manufacturing sector) keeps the other 91.2% of the country going.

Actually in terms of their contribution they take a lot more than they pay in, and when you consider the impact they have and the benefits they gain from being part of our society they are in tax deficit.

As "if you curb bonuses/put up higher tax band you are also slashing ambition/hope/inspiration and a drive to succeed and also be rewarded with a great salary at the end of it." These people are not entrepreneurs developing new products and services and benefiting from their endeavours, they are people working in companies that were built before they arrive and will be there (well some of them) when they have gone. They have benefited from the society which allows them to succeed so should contribute back to it. The 50p tax rate only kicked in at £150, 000 so only anything after £150, 000 (including tax increments) would be taxed at 50p in the £1. That is still a fantastic salary but it takes a whole world of people around you to facilitate earning it, you have to contribute back.

Entrepreneurs do not pay PAYE only people on salaries. The problem people have with bonuses and huge salaries is that actually the rewards seem to far outstrip the performance of these masters of the universe.

Larry TThankyou for your post and all other links and recommendations - this topic really interests me and I'lI'll definitely have a read.

A PP spoke about the CEO being a thousand times more valuable than cleaner ; whilst I'm not saying that it's true, isn't the argument that "aanyone can be a cleaner and very few people can be CEO to a massive firm"? and so these CEOs can negotiate these fees?

And I agree with a PP who said if you cap earning then it may have a negative effects on work ethic and ambition.

But, I also can see the posts about inequality. Aah, I shouldn't be allowed to debate

LongTimeLurker Yes because the financial services contribution on 9.8% ( actually smaller than our much maligned manufacturing sector) keeps the other 91.2% of the country going.

Where on earth do you think those British companies are listed, and their shares traded then? Which successful legal regime provides the background for that? Where are the banks based that finance the expansion of those manufacturing companies? Or the mortgages to their employees?

Actually in terms of their contribution they take a lot more than they pay in, and when you consider the impact they have and the benefits they gain from being part of our society they are in tax deficit.

Presumably you think that the reputation (slightly sullied but still a lot better than many) as a good place to do business is worth nothing at all.

But no, you're right. Life is actually very simple. Just be most likely a man and work in a car factory, and you're instantly way more important than any mere trader!

Yes but companies being listed is not the same as the financial services contribution to the economy though is it?

"Just be most likely a man and work in a car factory, and you're instantly way more important than any mere trader!" You've either misunderstood my point or are conflating the argument, either way you're doing it poorly. Manufacturing contributes considerably more as a % of the economy than financial services.

The argument was that in terms of the rewards paid, success of the companies does not seem to match. The same argument goes for the net tax take when you consider what infrastructure/legal structure has been put in for the city to exist in the way it does. What is the cost of the Government redevelopment of Canary Wharf? Jubilee Line extension, DLR, Crossrail, much of it built to service the hubs of the city? What is the cost of the bank bailout, in terms of the asset buys between the BOE and banks early in the crisis we will never know? What was the impact of the credit crunch on our other industries? Vast devastation as access to credit dried up and even businesses that had full order books collapsed. Effectively caused by greed in the city.

I'm not saying its all bad, but I'm saying we vastly over inflate the success and the positive nature of the city in order to continue paying such hefty rewards. Its the vested interests suits those in FTSE 250 companies to continue to put this story across as it pays out for them, but look closer and its not as it appears.

Which goes back to the original question, why do people have an issue with bankers bonuses? Because the rewards seem to be vast for fairly short term and not always large amounts of success. Because when deals go sour the public picks up the bill, but when times are good the rewards are private.

Well, there wouldn't be much point in them being listed if their shares couldn't be traded longtimelurker. There would be no finance for those manufacturing companies to be expanded with. And yes, services to the City cost money, but then you also have spin-off jobs and rewards that contribute to the economy to counter-balance that.

Which goes back to the original question, why do people have an issue with bankers bonuses? Because the rewards seem to be vast for fairly short term and not always large amounts of success. Because when deals go sour the public picks up the bill, but when times are good the rewards are private.

I do see your point, but a lot of it is based upon an easy target. Some local authorities are arguably much more immoral, because they are in charge of public funds and a higher standard of duty is expected (but not often achieved). The practice of under-performing managers being rewarded with golden handshakes is a massive problem in the public sector. In fact, the really massive last trench of scandals following the last recession didn't even concern company directors - Paul Flowers' Co-op was a, well, co-operative. And meanwhile the gravy train moves smoothly on in the public sector with cover-up of scandals as standard.

"Which successful legal regime provides the background for that? Where are the banks based that finance the expansion of those manufacturing companies? Or the mortgages to their employees?"

All of this is still part of the 9% contribution to the economy. Yes its important, but not so important the vast rewards that are paid need to be paid.

A good point made by an economist at a lecture I attended was that people who are in salaried positions in companies now want to see the kind of rewards that entrepreneurs and others used to get from risking their own assets on business deals. It simply is not justified to do this, and has been the cause of much of what has gone wrong in the financial sector. It encourages far more risk taking on short term gains ( see libor rigging scandal as just an example) than is actually necessary with the long term interest of the company and its investors taking a back seat to the benefits of the people conducting deals and trades.

But we are not debating "public sector" are we, bringing that in just conflates the argument as we are not comparing. We were discussing why people disapprove of bankers bonuses.

Yes there are issues SOME of the public sector. But it wasn't responsible for the crash of 07/08 in fact public spending was at the same level of deficit that it had been in 1997. There are far more well paid bankers than there are public sector employees.

Corporations have Ltd Liability which means that they are protected by law for all sorts of things. For one it means due diligence on deals. Not money laundering, price fixing and such. They are supposed to have corporate responsibility because the law protects them far more than it does a truly private sole trader, whose is liable for all decisions and debts made by the business.

"Well, there wouldn't be much point in them being listed if their shares couldn't be traded longtimelurker. There would be no finance for those manufacturing companies to be expanded with".

That's the problem there in a nutshell, the city no longer exists to provide funding and help business growth, well very much, long term investment is down and short term ( the average length of time a share is held is 22 seconds) and much of the trading takes place purely on short term goals for individuals not for long term gains of institutions and firms.