Bankers going to get their bonuses anyway

[jujumaman]

here

I don't know what to think about this.

We have a friend who works at another bank that has been bailed out by a foreign govt. He was telling us this weekend that he's planning to sue because he may not get his promised bonus of £2m or so, and will "only" end up with his salary which is prob around 250k

I know bonuses are intrinsic to banks' cultures but how - in these god awful times - can £2m bonuses be justified. My friend says his was the only division of his bank which made money last year, so why should he be penalised for others' faults? My feeling is every taxpayer is being penalised for others' faults and someone who is still earning an excellent salary should graciously accept it and be grateful he still has a well-paid job. But my dh tells me I'm being naive and that bankers will carry on getting these vast bonuses just as before. Not convinced by arguments in article I've linked to. Anyone with more knowledge of the city than me like to defend my friend's position (I v much like him personally.

I really think the number of people in banking actually getting bonuses this year is going to be pretty small.

DH and I both work for banks, neither of which have been bailed out. He got his compensation yesterday - no bonus, but decent pay-rise (which is what we'd prefer to be honest, better for mortgage applications, reliable income etc going forward).

I find out my comp today - I work for the afore mentioned bank that has turned a pretty good profit this year, so will be interesting to see what happens. I've always looked at bonuses as just that, whereas most of my colleagues seem to expect to receive them, so anything will be a pleasant surprise, especially this year.

NBN< out of interest are you in a front office revenue-generating role?

Time for a chuckle again - not from the Mash
which was a bit meh today but from..The Independent!

Very very funny, I thought.

'Next week a minister will announce that the Bank of England has revised its forecasts, and instead of the crisis getting as bad as diarrhoea, as it first thought, it now expects it could be as bad as gastroenteritis, and the IMF believe it could even reach the point where it's like one of those days when it's coming out of both ends at once.'

Cote, Squiffy's Spectator article is different from your point. My apologies!

Squiffy, having read the Spectator pov have a look at what the other side says:
Community Reinvestment Act had nothing to do with subprime crisis
Private sector loans, not Fannie or Freddie, triggered crisis
Think Again: Meltdown: The Blame Game
No, Larry, CRA Didn?t Cause the Sub-Prime Mess
The "Liberal" Subprime Crisis -- Myth and Reality

As said before, it does look like the Republicans were trying to spin a story to get their man elected.

As regards your 'facts', Cote, I need to make two points:

1. If you regard the 1999 Gramm-Leach-Bliley Act - lobbied for by Gramm, signed by Clinton - as the source of all evil

you might want to consider this sentence: 'The banking industry had been seeking the repeal of the 1933 Glass-Steagall Act since the 1980s, if not earlier.' Is it not true that relentless lobbying from the banking industry was behind this piece of legislation?

1. Yours is merely an opinion. Other people have different opinions.

For example, a chap called Adair Turner - current Chairman of the FSA - disagrees with you. Read the paragraph starting with 'Narrow banking and investment banking.' It is far from clear whether a repeal of Gramm-Leach-Bliley is The Answer to all our problems.

As thought DH's team is being shrunk in numbers, most of the senior management have lost their jobs and have been told relocate to HQ or lose your job

Personally DH is one of 5 going for 4 jobs but he feels a bit optimistic that he will get a role, phew but is very sad as a lot of his colleagues are now looking for new roles or facing redundancy.

LIZS and chocolatedot - any news, fingers crossed?

Sorry to hear that SK Do hope it works out for your dh. dh is fortunately ok , as are senior managers, but within his team there are 8 employees but now only 4 jobs. Several of these have very young families

chocolatedot - no an analytical role between front and back office. Suits me fine as I can slink away from the craziness of the desk when it gets too manic

Scores on the doors are in anyway - bonus 50% down on last year (still more than I was expecting). Pay-rise could have been better, but frankly having a job is a good thing at the moment so am not complaining.

Interesting thread - I work in financial services (not banking - but a related organisation) but am woefully ignorant about how things work. Squiffy and Cote's posts have opened my eyes to things - it seems that very few people in banking will get bonuses, large ones anyway. And that seems right, given the circumstances. But I hope, like Squiffy says, that those most responsible for getting us into this mess have already gone and we need the more sensible ones to work things out.

Did anyone watch the Evan Davies programmes on the City? I thought they explained some quite complex things well (although I kept thinking he'd suddenly break into 'but with its unfortunate strategy, Northern Rock has angered the dragons' )

I agree great thread very educational but I can't join in as I just a lowly public servant! I know just want to look after what I have left

I saw part of the Evan Davies programme (was there more than one?). Very interesting. But he's far too close to big business himself - one of those specialist correspondents who has gone native. Gives businesspeople such an easy ride on Today.

Ah this thread carries on illustrating that some people just don't get it.

Pay rises and bonuses (up, down or sideways) should not be happening in companies bailed out by the taxpayer (those that havn't been and won't be I suppose it's diferent,) deferring your equity then talking about interest at 10% is crazy. Where are the 10% interest rates for the people actually paying those salaries?

some other points

yep 10K is crazy in current circs and would get my ire (10p would get my ire actually)

Mrswobble someone has allready posted that there will be a get out clause in these contracts bonuses ARE discretionary. My employer has made significant changes to my terms and conditions in their favour long after I've signed the contract and there is nothing I can do about it. I'm prepared to accept that the gov. didn't dole out the bailout funds apropriately but no one has used that defence have they?

Eldon if said bankers aren't happy with their bonuses they can always go work in woolworths get another job.

Who ever posted it, it's been said before you shouldn't rely on your bonus as motivation for doing your job IT'S DISCRETIONARY.

oh and chocdot gambling someone else's money isn't that stressful is it really?

working out whether to take the baby P's of this world into care or leave them at home that's stressful.

Deciding whether to give adrenaline or atropine and when at what dose and whoops you hesitated and the patient is dead that's stressful

Nneurosurgery on an awake patient yup that would get most peope's stressometer going

Being Boris Johns(?t)on or crash Gordon that's stressful

Air traffic controller yup they need looking after

Gambling someone else's money.... that's a computer game for a lot of people isn't it?

Edam - there were at least two or three 'understanding the city' programmes (agree with you about Davies - he's not carrying Today at all).

Daysoftheweek - you're right, a lot of us don't get it. But we're trying to read this, the interesting articles quoted, watch the news...try to work out what's going on and what should be done from here.

I want to read those articles DaddyJ and Squiffy have quoted but it is too late and bed is calling.

Sorry guys, there are masses of jobs where people work a 12-hour day under immense stress for a fraction of the financial rewards. Teaching in an inner-city comp or working in an A and E department, for a start. Traders do not have a monopoly on demanding work. Frankly they wouldn't last five minutes in the average Year 9 classroom on a Friday afternoon IMO.

But the city think we're all fools for doing those jobs!

It always strikes me as surprising that people do jobs such as working in inner city comps which are often described as being unbelievably frustrating, stressful, unfulfilling and nightmarish when apparently they could instead go and play "computer games" in the city for a multiple of the salary.

I can understand the anger over RBS bonuses I really can. Equally I absolutely agree that city salaries have been too big. Notwithstanding this, I think it would be a mistake from the perspective of the taxpayer's investment in the bank to underpay talented people within the institution who are needed to retore the bank's viability.

Well, looking at today's news, it seems like Stephen Hester, chief executive of RBS has adopted a 'damn the torpedoes' approach and pay the bonuses anyway.

His rationale is 'I have to have the best people stay with us and attract better people to replace the people who got us into this mess'. All this against overwhelming public opinion.

His reason is what minority (in number, not necessarily weight) voices on this thread like MadameC, Chocdot, Squiffy and Cote have been arguing.

I think it is important to step back from pitchfork sharpening and actually try to understand the bigger picture of what caused this bubble, how the City works and how their recruitment and remuneration policies can result in immense profits and catastophic failures. Then, how best to rein in the darkers forces without sapping the vibrancy and dynamism of the City.

I feel there are important differences between what makes bank profitable (which will have to happen otherwise we will never come out of this mess) and what makes a hospital wellrun, which does not go into the question of how 'worthy' the life of a banker is compared with that of a nurse.

I am off to read the links ...

Can I kiss you Blueshoes?

I did have a snigger at Hester's comment that "City salaries have been too high" as he weekends at his 350 acre estate in Oxfordshire.

Yes, there is always that irony. I also wonder whether Stephen Hester was one of the people who got us into this mess ...

blueshoes..you have completely missed the point. If RBS want to carry on paying their staff what they like they are welcome to if they give the taxpayers their money back first.

If RBS hadn't been bailed out..it would have gone bankrupt wouldn't it? In which case would the employees have been still trying to prove they had a legal right to bonuses?

I think the government is completely incompetent to have bailed them out without taking control of bonuses at the same time. Other governments are not as incompetent as ours as Obama and Sarkozy are putting measuures in place. I heard today on the news 2 banks being bailed out in Ireland will not be able to give bonuses.

Also how patronising to imply some of us don't understand the bigger picture. Of course we do. The banks lent irresponsibly the government allowed this to continue and as a result those of us who are responsible with our money are losing out, as we have no interest on our savings and will have to pay more tax to save the banks. It is not just us but our children who will be lumbered with this burden. Why increase it by giving bonuses.

Obama's proposed cap is equal to £350k in bonuses. RBS bankers can only dream of such largesse.

We are where we are. The choice now is to whether to rebuild the bank into a viable lending instituion or effectively turn it into a utility. The former gives taxpayers a far greater chance of recovering their investment than the latter. Isn't that what matters?

Remember that Lehman's went bankrupt and virtually all senior bankers there were re-employed within weeks at Barclays and Nomura, all on guaranteed bonuses.

And actually happywomble, if RBS had gone bankrupt, those employees with contractual bonuses (which includes anyone previously employed with ABN Amro) would have been pretty much first in the queue for their payout. That's the way insolvency legislation works.

Happywomble, these bonuses are a drop in the ocean of the sums that are being used to bail out RBS.

I am not saying you are wrong (because I cannot claim to have the big picture without reading up much much more) but there is such a concept as penny wise pound foolish. Or now that the government has bought out the bank, don't kill the goose that lays the golden egg.

I think the government is more mindful of these issues than you think. It has been demonstrated time and time again that governments and civil servants are not the best people to run commercial organisations like banks.

I like chocdot's description of an institution run as a utility, because this is what civil service pen-pushing short-sighted penny-pinching will result in.

You are arguing for the pendulum to swing the other way. I am saying we have to look for a reasonable middle ground between unfettered entrepreneurialship and methodical box-ticking.

If you believe the 80-20 Pareto's principle, 80% of RBS' profits are being generated by 20% of its workforce. I am sure the performers are not being bonused anywhere near what they would get had RBS not been bailed out. But as a bank, it makes very good business and commercial sense to reward your 20% with their contractually entitled personal performance element of their bonus.

The City is extremely cutthroat. The 20% are known in the market and would already have been sounded by headhunters long before this bonus issue erupted. There is a dearth of finance jobs, but it is a tenet of recruitment that for the right person, a company will also create a vacancy, especially if that person will bring in business well above their salary and costs.

The vultures of circling. RBS needs to have a response. Personally, if I was a star RBS performer, in two minds about whether to accept another offer, the fact that my chief executive braved hell and high water to ensure I got my reward (less than it would have been at another institution) might actually spur me on to work even more to pull the bank out of the brink aka loyalty.