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.

Lots looking for work, not necessarily the ones you want to hire though. I agree that the mindset is very money focused and unlike most other industries. There is very little loyalty (both ways). BUT if we want our 'investment' to be worth something you want to attract the very best who will be poached to go to other banks unless their pay is competitive.

Aboslutely Happywomble. I remember once working from 7am to 11am plus weekends because we had a deadline to meet. Did we get a bonus? Nope. We did it anyway because we are committed to our job and derive satisfaction from knowing that the customer really valued what we did for them.

There will be lots of graduates flooding the job market in June/July plus there are many able people out there who may be looking for a change in career. Despite what they would have us believe, the work in banks is not beyond the capability of anyone with an inkling of intelligence. Granted, there is tacit knowledge which can only be gained by doing a job but with the right support and a certain level of explicit knowledge, those irreplaceable bank employees would soon be forgotten because nobody is irreplaceable.

If you are employed on the understanding that the 'bonus' is part of the salary though then it is like giving a pay cut.

Times are hard for everyone, yes. But the current outrage seems to be about the 'fat cat' bonuses rather than the ordinary workers imo.

People won't necessarily move for slightly more pay at the moment as there is too much risk involved. You could maybe get a job on 10k more at a non nationalised bank but then lose your job a few weeks later with little redundancy pay, whereas if you stick in your current company you would have a better payout if made redundant and thus more job security. The young singletons might be willing to take this risk but people with families probably won't.

I really don't think there is a limit on the number of "best" people available to work in banks..maybe for the very top jobs but I expect they are well remunerated in the Nationalised banks anyway.

I think it is natural for most people to be money motivated (myself included) but we also have to accept the reality of the times we're in and not be too surprised if bonuses don't materialise.

'There will be lots of graduates flooding the job market in June/July plus there are many able people out there who may be looking for a change in career.'

Sorry but the graduates joining need to learn from someone, they can't start running the Industrials M&A team overnight can they? Ditto lateral hires from other industries. You may hate the industry and how people within are paid but if you want a return on the investment rather than sinking billions into an empty hole you will need to pay the best people to remain or watch them walk to other banks who are still hiring the 'rainmakers.' The problems were caused by a tiny group within a tiny bit of a tiny department (in the grand scheme of what a bank does) and if you want to keep competing with the Morgan Stanleys and Goldman Sachs you will have to pay the bankers a competitive wage and that means a bonus.

You are not talking about slightly more pay though which I agree does not make sense in a risk reward sense. You are talking about no bonus at all (and bankers see bonus as part of their total award NOT as a real bonus in the truest sense of the word) versus being guaranteed 3 or 4 times your base salary for 2 years in some cases.

Susie, that is why I said "Granted, there is tacit knowledge which can only be gained by doing a job but with the right support and a certain level of explicit knowledge,those irreplaceable bank employees would soon be forgotten because nobody is irreplaceable."

Workers in banks are not all going to walk out at the same time in this economic climate. This is a wonderful opportunity to change the culture in banks by bringing in new blood, changing work practices and for succession planning.

"I remember once working from 7am to 11am plus weekends because we had a deadline to meet"

I agree, most of us do stupid hours from time to time when need be, but are you aware of the hours that are expected of junior bankers? In the big investment banks it would be totally normal for an analyst (most junior position) to work every weekend and work 8am - 2am maybe 4 nights a week.

Spokette - a change in culture would be wonderful, I hope that does happen, I don't think it is likely. The big fee earners will have 10+ yrs experience and significant industry contacts and client relationships none of which can be replicated. The grads they take tend to be the creme de la creme as it is so I can't see anything much changing. As long as the Amercian banks are still in business over here it will be very difficult to change the culture (which is very similar to fagging, I went though hell when I was junior, you can too and then earn millions one day....)

Bubbaluv - exactly, the hours are incomprehensible to most people and in my personal experience, completely unecessary most of the time. There is a reason that bonuses in banks are actually called compensation. It really is compensation for not having a life!

(Susie sighs with relief and thanks god she is well out of it)

Oh and unfortunately it is usually 2 or 3 people earning most of the fees in any department and they are the ones that will leave our nationalised banks if they are not paid. They are the ones we need to retain in order to get something back for our money (the bonuses are a drop in the ocean compared to what we lose if these banks don't recover)

i don't how much value you place on anecdotal evidence but apparently when warren buffett took over Salomons he cut the bonuses drastically. 75% of the traders left within a year and results nosedived so they changed the bonus policy back and a lot of the traders rejoined on bigger packages than they had before.

Doesn't surprise me at all, mrswobble. Where I work those that have a reasonable amount of experience behind them - in their 30's or 40's maybe - either cannot afford to pay their basic household bills (mortgage, childcare, etc etc) on just their basic alone, or are in the position of not having to work and doing the job because they have a passion and love their work. to be honest, I cannot see any of them staying around long, and those that do need to work will be moving out into industry and the professions (nearly all of these senior staff have phd's and MBA's and professional qualificaitons and their skills are fairly transferable). Which just piles on the pressure for anyone else - and those posters that smugly believe these bankers haven't a hope of finding work forget 2 fundamentals - (A) they had nothing whatsoever to do with the problems that created the mess we are in and recruiters know that, and (B) whether they are deserving or not, most of these people were 'creamed' off the professions in the first place only because they had outstanding CV's - the banks could pick and choose their 'newly qualifieds' (lawyers, accountants, tax experts) so they tended to hire the people with double-firsts, an oxford blue perhaps, high energy levels and huge enthusiasm. Having all of these people flooding the professions and industry will affect the job security of people even further removed from the chain of events. And I can't see that helping anyone in the long run (least of all the taxpayer who sees the banks fold).

Squiffy..what kind of salaries are these people in their 30s or 40s on. I expect they are higher rate tax payers and can afford to live without a bonus, although maybe will have to cut back on luxury cars and holidays. If they have taken on huge mortgages on the assumption of getting a great bonus every year they can't blame the taxpayer if it all goes pear shaped. If they are that bright they will have saved a good chunk of money for a rainy day year with a low bonus.

I expect those with double firsts, the creme de la creme are on good basic salaries.

If they decide to leave banking and become teachers then I will be happy to have them educating my children. But I doubt they will as their basic banking salaries are probably way beyond most teachers salaries.

I notice Vince Cable is saying employees of bailed out banks shouldn't be given bonuses at all and he appears to be somebody with a good understanding of economics and the banking system.

Susie100 - I don't want Lloyds TSB to be competing with investment banks. I want them to run my current account in an efficient way and to offer services such as mortgages. If the high street banks had stuck to being high street banks we wouldn't be in this mess.

Squiffy, I employ guys with firsts and PhDs from Oxford and Cambridge and my organisation is replete with people with those type of qualifications (me included) so those type of people with outstanding CVs can be found anywhere, not just in the hallow vaults of banks.

However, having those type of qualifications does not necessarily mean that you have the the other important qualities that makes a highly valuable and wanted employee. Being able to work as part of team, thinking laterally and creatively, communicate verbally and orally, being sensitive to the needs of others (a quality I suspect is alien to quite a few bankers), working flexibly, being self-motivated as well as industrious, demonstrating probity in their work and interaction with others [banks? )etc.

The myth that bankers are a special breed who deserve their oversize salary packages is just that, a myth.

Happywomble, if you read my earlier posts you will see that after paying for the marginal costs of working (childcare, commute, train car park), I have left £10 a day out of my basic take home. That is before 'luxury cars' and 'fancy holidays' and 'huge mortgages'. And I am a higher rate taxpayer. Your claim that these 'double-firsts' are all on great basics is just bollocks, that is why 'bonuses' are such an emotive topic. In banking it is just like in a sales job - you get the skimpiest of basics and everything else is made up of 'commission' which you only earn by working your socks off, and getting results.

I would dearly love there to be no bonuses. But only when my basic is brought up to the level it would be if I worked in industry or the professions. No more, no less. Seems reaosnable to ask for fair day's wage, for fair day's work.

spokette, nowhere have I suggested that we are "a special breed that deserve our oversized salaries". Likewise I tend not to assume that all bankers are brian-dead over-ego'd scum incapable of empathy, teamwork or hardwork, which seems to be the record you keep playing.

Sqiffy, you forgot to mention the lady who does your ironing in your marginal costs of working.

Spokette, do you really think bankers are horrible people just because they have taken high paying jobs? Why the assumption that they are lacking social skills? Having been involved in the recruitment process I can tell you that the qualities you describe as necessary outside banking are all pre-requisits in banking along with the extrordinary academics etc, but even amongst candidates will all those qualities banks are vigogrous in thier selection processes.
I don't know why it's so hard to accept that very few industries/professions are as enormously demanding and selective in thier recruitment process. It is actually a truth.

spokette: "Being able to work as part of team, thinking laterally and creatively, communicate verbally and orally, being sensitive to the needs of others (a quality I suspect is alien to quite a few bankers), working flexibly, being self-motivated as well as industrious, demonstrating probity in their work and interaction with others [banks? )etc."

Sounds like some of the bankers I work with. Not all are overremunerated arseholes. I feel you might be prejudiced just because they are highly paid and sought after.

Bubbaluv, I did not say that all bankers lacked social skills. I was making the point that having excellent qualifications from top institutions is not the only requisite for someone being viewed as a valuable employee.

As for your last paragraph, where have I said otherwise? The only point I'm making is in response to the myth being peddled about bankers being invaluable and irreplaceable.

Blueshoes, the only thing I am prejudiced about is the fact that many businesses are closing and people are being made redundant with no money from the taxpayer. Those working in banks like Lloyds and RBS still expect their bonuses even though they are being underpinned by the taxpayer. It is not just me, politicians like Vince Cable and even Dave Cameron are saying the same. If that makes me prejudice, I'm glad.

David Cameron and the likes are just playing to populist opinion ...

No one will shed a tear for these bankers. The cream of the crop will simply leave to work for a bank/institution that is not so constrained by the fact they are state-owned. That bank/institution will make the profits and the RBS and Lloyds will be left with deadwood that cannot go anywhere else. Sounds like a good way to turn a commercial organisation into a sleepy hollow.

But what the heck, it is what the taxpayers want. They can be left carrying the baby then. The free market will sort itself out.

Here here Blueshoes and Squiffy, the utter rubbish that is being spouted about bankers (they qualities and their salaries) makes it obvious that lots of people have no idea about the industry.

I agree with blueshoes

Free markets will ensure that those bankers that really create value will seek the best overall package (pay being quite high up the list + quality of life) and are likely to end up in banks that are not state-owned. Arguably, these are the bankers that banks in the most mess need most - but if the package isn't right, they will leave. The challenge, of course, is identifying the real talent from the overpaid useless ones.

I admit having worked in the city for nearly 10 years, i have met some people who, in my judgement, are not particularly good - but the majority have been very bright, talented, self-starters. Do they deserve the pay they get? I think that's where free markets come in -- anybody is welcome to try their hand at it....

To answer an earlier question (i think from happywomble) - i would say basic salaries for reasonably experienced people (5-10 years?) would be £80K to £140k? = bonuses on an average to good year c100-150% of salary? but for those working on deals that have come through, probably more like 300-400% - and perhaps for traders where their P&Ls are very transparent.

I work for a non-bailed out bank- not in a front office role so not directly responsible for the bad decisions. In my bank the people in the securitisation/cdo area who did make bad decisions are long gone- they weren't around to get/not get bonuses.
Everyone else has taken drastic cuts in bonuses and there have been (and continue to be) hefty redundancies.
The bonus culture needs to change in that it needs to bercome more long term- though to a large degree it already is - a considerable portion of my previous bonus is tied up in shares. But if bonuses are banned people will leave as the bonus is viewed as part of the compensation package (even though it definitely isn't legally for most people) - if the bonus wasn't likely to materialise and you were left with the salary for most people this would need to increase for it to be commensurate in what they could get in other jobs (eg within the professions). It is a trade off between interest in work, hours, prestige and money and if you upset this balance then things change. Most people accept that this year is a poor year but the question is how long will they stick it out for.

On the more general lending question - I agree that "bankers" lent badly (although a lot of the banks hit were not actually the lending backs but are equally culpable for failing to understand their risks) - but people also borrowed badly- there was a culture that everyone was entitled to buy property and should be helped to do so - before the crash there was blanket media coverage supporting this and complaints when individuals couldn't borrow enough to buy and get on the property ladder. Property was seen as a profit making opportunity and not just as a home.

dorothygale. I agree that people expected to buy their own home. Not through greed in any way but no viable alternative. There is no housing stock for families on middle income with any security. My next door neighbour rented her house 4 times to four professional families within 5 years then sold it. I have kept in touch with two of those families all with two children. 1 brought their home, both work full time have not moved again since. The other a college lecturer and builder (I think he's in a dream world but hey that another subject) They have moved 5 times in four years! The price keeps going up and they have strong views on debt. Sadly I think the middle strata of society get hit in the goolies every time. We need to increase decent rented housing stock with security. for the tenant. I can't see that happening in the UK.