Bankers are bloody getting away with it.

[julesrose]

unlimited bonuses and this crappy government can't / won't do anything about it.

I think I'll move my bank account to the bank who pays the lowest bonuses. Anyone care to join?

lifeincrimbo - A banker who lost 100 million in a given year would probably be fired, let alone given a big bonus. The ones receiving big bonuses now are those whose peerformance was good in 2010. That is how these things work.

"You have to be lacking morals to be a banker and accepting HUGE bonuses, it's just plain sick"

That is one of the most ridiculous statements I've read on MN, and that is against some competition.

Those people work very hard to receive that money which is a function of their performance during the past year. (And if you work oh so hard but earn peanuts, you should have gone into a profession that pays better). It is stated in their contract that reaching a certain target will be remunerated thus. Why on earth would they not accept this renumeration? What does this have to do with morals at all?

In this funny world of yours, are lottery winners (who don't work at all for the payoff) "lacking morals" to accept the millions that are thrown at them? If not, why not?

CoteDAzur: "If all bonuses were outlawed tomorrow, base salaries would increase tenfold, and high earners would have less incentive to work hard. That is not a good thing."

Less incentive to work? It is simply not true. Money does not make people work harder. You may really really believe that to be true, but I'm afraid it isn't.

CoteDAzur: "A banker who lost 100 million in a given year would probably be fired, let alone given a big bonus."

I present to you, Eric Daniels.

Of course there is a moral argument about the bonuses - it is the most ridiculous statement I have ever read on MN to say that it is NOT.

It is not a stupid statement Ladyblablah - I used to get a bonus - albeit a small one as I wasn't employed to take risks - what was I supposed to do, rip up the cheque, hand it back, give it to the guy selling the big issue standing outside the building?

I worked bloody hard, as do most people in the banking world, unsociable hours, most are on the train before 6am, most work hours of unpaid over time and have to have degrees to get to the top of their field.

They take the job knowing this but also knowing that there is an element of reward each year.

I have no idea where morals come into it?

Of course knowing that your bonus is down to performance makes you work harder and take less risks, if you were getting it regardless by way of a hugely inflated salary to make up for not receiving a bonus there would be a more devil may care attitude prevalent.

Money does not make people work harder.
Erm...THAT is perhaps the most ridiculous statement I've ever heard on MN!

Let me see. Let's not use banker. Let's use a school teacher.

Teacher A is paid whatever a teacher is. £30k, whatever. It's hypothetical anyway.

Teacher B is paid £30k BUT teacher B is told she will get a £1 million pound bonus if her class get all A*'s.

Who will work longer & harder? Teacher A who will get paid the same regardless of whether she goes home on time or not? Or Teacher B who for a year's worth of solid graft will be able to enjoy financial security for her family for the rest of their lives?

LadyBlaBlah - Is there a name for this planet of yours where money is not an incentive for people to work harder? On Earth, people tend not to work harder if they will get the same reward regardless of effort.

And what about Daniels? He had an expected bonus of several million but got nothing last year, as it emerged that Lloyds made billions of losses under his management.

Hey, you guys, so sure of yourselves and your monetary rewards equalling more work. You should do some rudimentary research about the effect of individual performance bonus schemes on work performance and take a deep breath.

The worst thing you can do to make someone productive at work is incentivise their performance with a monetary reward.

The best way to incentivise people is by team targets and team bonuses, not individual bonuses.

Niceguy - your teacher experiment is a really good example. Which one of the teachers would resort to underhand tactics to get to their (probably unrealistic) target of 100% A*'s? Will they have to shift out the SN kids? Teach them cheat methods in the exams?

Despite all of that - is Teacher B more guaranteed to be more productive? DOes staying late equal better work? In no way at all are they guaranteed to be a better teacher, more productive or more effective. That is a ludicrous statement. You think money will automatically turn someone into a more productive teacher, and you will be sorely disappointed.

Bonus does not make people more productive.

In the City it makes traders take perverse amounts of excessive risk in order to get a lottery win style bonus. Each year the clock is set back to zero and a trader is free again to try and make a big profit almost at any risk. Even if (s)he made a big loss the previous year a big trading win by sheer luck this year leads to a big bonus - the loss in the previous year does not result in any money being taken off them they just dont get a bonus. They dont get a negative bonus if they make a big loss.

It is an asymetric system and that is what is annoying people so much. Big losses two years ago have been forgotten about already and all City people want to talk about is the profits they made this year.

There was/is only upside in the City bonus system and that is why the authorities are trying to get them to take some of it in shares and leave it at risk for 3 years before they get it in cash. Some hope.

Is the argument that money makes people work harder, or that it improves performance?

It could make people work harder/longer, if the job is a very routine and simple task where the more time/energy you put in, the more you get done, the more money you get.

But for a job that requires intelligence, having monetary incentives can actually reduce performance.

This short video explains it really well

Team bonuses are a good idea everyone works together, everyone will try to help each other (no man left behind kind of thing) in order to succeed. Of course if they fail to meet their goal because of a person in their group well it's likely that person would be alienated.

Individual bonuses do increase a persons productivity but also increases their arrogance, and refusal to accept blame it also creates an environment based on competition only which is not always bad but there is a tendency to get nasty and use underhand tactics(ever seen car salesmen at work?)and depending on the job i.e banking that can lead to terrible consequences.

Love that You Tube video - the animation is excellent !

It absolutely sums it up. The bonuses are not only unnecessary, they actually hinder performance (crash anyone?)

Hi Saltatrix, good point about the effect of bonuses. They can even reduce productivity. There are other more effective ways to boost performance, proven by the

Wow life that vid is so true I found myself agreeing with so much especially his last comment it would make the world a better place.

BeenBeta

I think you may be correct that some people do play the "trader's option" but that is an unfair representation of all institutions in the City.

Not all investment banks pay purely on what they made that year and most hedge funds definately don't. Most HF managers/traders only get paid above their high water mark. So if a trader made $20mm in 2009 and lost 10mm in 2010, they would not accrue compensation in 2011 until they had made back the lost $10mm.

Moreover many institutions operate netting so that if three traders in a team make $20mm, -$10mm, $10mm, the compensation pool for the two traders in the positive is $20mm not $30mm. This encourages traders to make sure that other team members don't ruin their performance by running too much risk.

Finally I think you need to appreciate that many of the people in the City are risking investor's and their own money. They have significant skin in the game. The only reason why traders in banks don't is because they are not allowed to co-invest due to FSA regulations.

The City has a huge variety of different types of people. Not all of them are as irresponsible as you suggest.

Half of bonuses are paid back in tax.

£7 billion in bonuses= £3.5 billion in taxes.

Limiting banks from paying bonuses= banks move their premises elsewhere= mass job loss= City collapses.

It would be morally wrong to interfere in pay in free markets in a free society, that would be the moral wrong.

The other morally wrong stance is jealousy which you see a lot on threads like this. Those people need to go to church more and consider the sin of envy and if they want a banker's pay go and become one. No one is stoppin you if you think you have what it takes. There are plenty of women in the City.

if you want to damage the poor and the wealth of this country you make this an unattractive country in which to do business and make profit but then many low paid socialists would rather every one had less even the poor if it means no one had more. That was communism and it totally failed.

Agree Xenia. 99 times out of 100 it's pure jealousy.

I bet if that poster who is bemoaning that the "fat cat's" get large bonuses were suddenly offered one themselves, they'd not turn it down on the account the sum was "immoral" or "too large". I'd also wager they'd suddenly change their tune on the 50% tax too!

Xenia, I always think of you as a Margaret Thatcher type of person :o

What do you think of the video?
Also, what about the sin of greed?

Just witnessed the edifying sight of Michael Gove on Question Time saying bank bosses had paid themselves "astronomical" sums and "appear to me to be living in a parallel universe to the rest of us".

Reply to shilly's point that "The point is that a number of bankers, probably in the tens of thousands, are in line to receive large bonuses (say 100k+) - despite the fact that their banks have relied on so much state support to survive that the economy is down the swanny from funding the bailout."

did you watch the joy of Stats on bbc4 last night? Nice chart on there - cost of Iraq war 2500 billion.......i think you have just found the hole in the uk public accounts. bank bailout kind of pales into insignificance. Anyway, the moneyt lent to the banks will be repaid. Look at the Swedish banking crisis back at the start of the 90's - the whole system had to be effetively nationalised but the government had actually made quite alot of money by the time it was all repaid by the end of the decade and they had sold the banks back to the market again. Everyone on here is confusing exposure with losses - these are two totally different things.

I dont think you'll find we are talking about tens of thousands of people getting 100k plus bonus - do the math on the number of UK banks that got bailed out, the size of their investment banking divisions (where the bonus get paid) and the fact that 80% of the pot will go to 20% of the people - its much smaller numbers. The other tens of thousands will be working for insitutions that have had no taxpayer funding if that makes you feel any better.

This whole argument is driven by jealousy - pure and simple. If you are a teacher but want a bankers salary stop being a teacher and go be a banker. i know plenty of people in the City who have come from really underpriviledged backgrounds and real poverty - they have pulled themselves up by their bootstraps - and work bloody hard. The former CEO of Merril Lynch Stan O'Neal was born into abject poverty - he worked his ass off to get where he got to no signs of any old boys network to help him.

I am prepared to bet that no one complaining on here about banker bonuses would refuse a bonus on moral grounds if it was offered to them. The green eyed monster rears its head again....

I can't see how morality comes into this.

Nothing immoral about banks taking state bailouts eh? I missed that bit of the free market ideology

Iggly - "I missed that bit of the free market ideology".

That is the basis of my disagreement with the whole banker bailout. It is not that people get paid a lot that bothers me. It is that the 'free market' was not allowed to do its work. To destroy those who made mistakes, took too much risk and mismanaged their business. Its how Capitalism works - creative destruction allows new entrepreneurs to come through to replace old failing businesses.

It seems bankers only like markets when they can make huge bonuses out of them but go running to Govt when they lose. It stifles entrepreneurs and imposes a tax on all of us proppping up these old 'bust' banks. Its just the same as we did in the 1970s propping up defunct steel mills and car factories. It was a deadweight on the economy then and just like bankers are now.

The Govt guarantees and virtually free money from central banks has to be removed and then we shall see how bankers fair in a real free markets.

All our working lives me and DW have been investing in stocks, bonds and commodites for ourselves and for others. No one bails us out if we mess up. Financial markets have been utterly rigged in favour of the banks and a select group of bankers are raking in bonuses on the back of that - not their own skills.

Govt ministers and central bankers have fallen for every excuse and blandishment of bankers. Bankers are robbing the UK taxpayer and consumers blind. The bonuses we see are the spoils of that looting.

Politicians need to get a grip and reflect what the people want who elected them - not what bankers demand.

Been I completely agree with you. It astounds me that this isn't pointed out more often, forcing the government to explain themselves.

If they want propping up then they should be made to repay. Be it through taxes, I don't care.

"The Govt guarantees and virtually free money from central banks has to be removed and then we shall see how bankers fair in a real free markets."

the whole point is that if they had not lent money to the banks (and it is a LOAN, NOT free money - it will be repaid, with interest) - your savings wouldhave gone up in smoke (ok if you had anything over the guarantee threshold), the business that possibly employs you would have been unable to fund itself as no one would be able to lend to it - so you would have lost your job, then other business would be affected by the fact that you had no money to spend so other people would have lost their jobs, the property market would have collapsed as no one could borrow money to buy a house at all... and i mean really collapsed....why cant anyone see past the end of their nose - that this was not a bail out of a bunch of bankers - it was a bailout of the whole economy - all of you guys too. Lets not forget too that many many people are benefiting from low interest rates at the moment too - your mortgage is probably alot smaller than it was once.

go ahead - remove free funding and see how a second credit crunch feels...it wont be very nice...thousands will suddently not be able to afford their mortgages - porperty crash number 2 will loom large...

I wondered when the accusations of jealousy would arise. It is such a typically ignorant response to very serious arguments. This is a debate about the rights and wrongs of rewarding people for bad work, and work which was so bad it harmed a lot of people who were unconnected to their 'work'. It is also about inequality and wealth distribution. None of that equals jealousy.

I notice NiceGuy, you have managed to ignore the facts about money and incentives - another nail in the coffin for the argument for such outrageously large bonuses.