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.

Some of you people really have the pitchforks and the torches out, don't you?

As squiffy said, in most of the financial sector, people work for the bonus. Having said that, I never heard of anyone getting £10 per day basic salary What exactly do you do squiffy?

"regardless of their performance, these hacks still cream off extortionate management fees"

Only fund managers get management fees. Needless to say, they are a very small part of the sector workforce - several hundred people within over 100,000.

Given that fund managers are not responsible for giving out sub-prime mortgages, cooking up credit derivatives, or setting strategy for banks, pray tell how exactly are they responsible for this mess? What makes them "hacks", in your view?

"Anyone earning over £20/25K should not get a bonus".

Sorry, but these are entry level salaries in investment banking.

Now, you might think this is excessive, but that is because you don't know what their work entails and how much money their work brings into their firms.

Squiffy - obviously calling everyone who works in banking "scum" is unfair and extreme but there is no denying that the financial sector would have been decimated had it not been for the government bail-out in autumn. My brother is an accountant working for an investment bank and he says that people at his firm really believed on that fateful Friday when the US senate were debating whether to pour billions into the banks or not that there would be no banking system by the Monday.

Now I appreciate that it is not your (or his) fault that some bankers were behaving recklessly - although I do wonder why the good guys didn't do more to highlight what was going on when it was so obvious that it was unsustainable - but I think the question of basic salary is a bit of a red herring. Had you been in many other industries - estate agency and building spring to mind - you could be without even that now. Lots of people work hard for not great wages; lots of people have high childcare costs and long, expensive commutes. Very few ever get the chance to off-set these with six- or seven-figure bonuses. It is insensitive to give bonuses in a period when so many people are suffering financially but it is obscene to give them to people in an industry which has caused much of this hardship.

Cote

Squiffy's worked out she earns £10 a day after costof commute/childcare etc

If I did that calculation right now I'd probably be bringing in about 50p a day. I know my nanny's earning more than me right now [scared emoticon] and I am paying her from my savings.

What are you on about Cote? What has entry level salaries got to do with it? Plenty of people in the wider banking community get paid much less than £20/25K.

When did this just become about investment banking? It was about the banks which have been bailed out by the taxpayer - specifically Northern Rock and RBS. I am saying that the top brass ahouldn't be paid whopping salaries out of taxpayers money, but that those on the very low salaies should.

This thread is not about what private companies should/shouldn't do so I'm not sure why you're getting your knickers in a twist.

Interestingly, I am currently at risk or redundancy, but also received my bonus this week (work at an un-bailed out bank)! It was absolutely loose change compared to the OP's friend, but as was mentioned somewhere, no bonus is basically the same as telling you that you should look elsewhere for a job.

at risk OF redundancy....

What am I on about? I suggest you re-read until you understand.

Entry level salaries have a lot to do with it, because what some people think is a huge salary is in fact very little for most of financial sector. The people who get paid less than £20K in banking are the little people (no offense) and have no responsibility in the making of this crisis.

Reading Obama's book at the moment and here is what he said in 2007 ( and yesterday obviously he just capped bonuses in banks with government funding)

" In 1980, the average CEO made 42 times what an average hourly worker took home. By 2005, that ratio was 262 to 1. Conservative outlets like the Wall Street Journal editorial page try to justify these outlandish salaries and stock options as necessary to attract top talent, and suggest that the economy actually performs better when America's corporate leaders are fat and happy. But the explosion in CEO pay has had little to do with improved performance. In fact, some of the country's most highly compensated CEOs over the past decade have presided over huge drops in earnings,losses in shareholder value, massive layoffs, and the underfunding of their workers' pension funds.

What accounts for the change in CEO pay is not any market imperative. Its cultural. At a time when average workers are experiencing little or no income growth, many of America's CEOs have lost any sense of shame about grabbing whatever their pliant, corporate boards will allow. Americans understand the damage such an ethic of greed has on our collective lives; in a recent survey, they ranked corruption in government and business, and greed and materialism, as 2 of the most important challenges facing the nation. Conservatives may be right when they argue that the government should not try to determine executive pay packets. But conservatives should at least be willing to speak out against unseemly behaviour in the corporate boardroom with the same moral force, the same sense of outrage, that they direct against dirty rap lyrics"

Gordon Brown should be done with it and stop this ridiculous outrageous moral deficient system.............of course he needs to grow some balls first !

They have absolutely no responsibility for the making of this crisis, which is exactly why they should get their bonuses, Cote, even though the companies they work for have failed. The people earning more, the decision makers, who oversaw and made the decisions which lead to this crisis should not received their bonuses. I have given a very low cut-off point specifically because people will begrudge bonuses for people in companies which have failed and been bailed out. But I don;t think many people would begrudge a couple of hundred quid for someone on minimum wage.

From Sqiffy

"If I decide that this £10 a day is not worth it and decide to chuck it all in, how exactly will that help the nanny who loses her job, and the ironing lady who does my ironing, and the guy at the railway station who gets made redundant because there are less commuters?"

Well there will always be a need for childcare so your nanny will be OK. You could do your own ironing. I seriously doubt your ironing lady relies solely on the salary that you pay her.

I don't know which train station you use but most trains are crammed at commuter time, even now so I doubt the job of the guy at the train station is under threat.

So you have £10 per day left after paying your staff, travelling expenses etc. Well, many people survive on much less and have to work long hours without receiving any perks like a comfortable open plan office. So excuse me if my heart does not bleed.

"You have the guys who are still 'rainmakers' - mostly in the equity and commodities and client relationships fields.These guys looked over at what the Credit guys were doing, thought they were all bonkers and quietly carried on making money for their banks."

They quietly carried on making money and said nothing. I was under the impression that these people were bright sparks so if they saw what was happening and understood the consequences and still said nothing then they are just as culpable.

""Hang on. I am working my socks off, making billions for the bank, and getting a hard time from everybody. It is just not worth it. I will go and set up my own company with my mates X, Y and Z. Of course 75% of them will probably fail when they go off and try to do this, but in the meantime who is going to stay and make money for the bank?"

Haven't you been watching the news? There is a long queue at the dole office so I'm sure the banks will be inundated with volunteers to work at much reduce salaries.

I'm sorry Squiffy. In my company and in most businesses, bonuses are based on personnel as well as the business meeting their objectives. If that does not happen, there is no bonus, irrespective of how an individual performs.

The banking industry is in crisis due to its own self-serving arrogance and to expect the tax payer to foot the bill for an individual's bonus regardless of the financial robustness of the business (Northern Rock!!!!!) is quite frankly disgraceful.

From Obama as quoted by Givepeasachance"

"Conservatives may be right when they argue that the government should not try to determine executive pay packets. But conservatives should at least be willing to speak out against unseemly behaviour in the corporate boardroom with the same moral force, the same sense of outrage, that they direct against dirty rap lyrics"

These same conservatives are also the same ones who went to the government with their begging bowl for taxpayers money.

When the times are good, they don't want government interference because that is the slippery slope to socialism and they work every trick in the book to minimise the amount of tax that they pay. Now that times are bad, they scream to the government, "help me, help me".

Those parasites make me sick.

"Many people survive on much less" is of course true but not a valid argument, because not everyone's value added is the same and this is not a system where everyone is entitled to the same income regardless of their value added.

Whether you like it or not, people don't have the same abilities and the same education. Manual labour will never make the same salary or standard of living as professions such as medicine or finance, for example.

What do you do in life, spokette?

Ok. Here goes.

"Well there will always be a need for childcare so your nanny will be OK" Um no. Just have a look at the nanny boards here - nannies are losing their jobs everywhere - there are loads of them out of work now. My (well qualified) nanny was looking for work for four months before I hired her and that was when times were good.

"You could do your own ironing. I seriously doubt your ironing lady relies solely on the salary that you pay her" No she doesn't. She has about 20 clients. But she has already lost 4 of them and is probably going to lose a lot more.

"I don't know which train station you use but most trains are crammed at commuter time, even now so I doubt the job of the guy at the train station is under threat". The station car park which I use now has places at 7.00 in the morning wheras before it didn't. The number of cummuters will go down it will affect not just the railway guys but also the guys who run the car parks, the woman in the cafe etc. I cannot see how you fail to appreciate that there is a ripple down effect for all these jobs that get lost.

So you have £10 per day left after paying your staff, travelling expenses etc. Well, many people survive on much less and have to work long hours without receiving any perks like a comfortable open plan office. So excuse me if my heart does not bleed" You're excused. I specifically said that I'm not crying either. I'm glad you mentioned my comfortable open plan office. I will add that to my perks column along with the commute and the long hours.

"They quietly carried on making money and said nothing. I was under the impression that these people were bright sparks so if they saw what was happening and understood the consequences and still said nothing then they are just as culpable". Actually, loads of people did say stuff. I can send you a draft of a speech I wrote that was given to Business leaders in November 2007 where many of the risks were pointed out. Many of us went to our bosses and told them it was bonkers to believe that when interest rates are at 5% you cannot just generate 15% returns out of thin air. We all told them and the people we told all though they knew better than us because they were on the board and therefore omnipotent. They're the ones that were rightly thrown out of the door when the shit hit the fan.

"Haven't you been watching the news? There is a long queue at the dole office so I'm sure the banks will be inundated with volunteers to work at much reduce salaries" OK, you find me someone with an MSc and five different professional qualifications who is willing to be away from her home for 15 hours a day for £10 take home. Line 'em up.

"I'm sorry Squiffy. In my company and in most businesses, bonuses are based on personnel as well as the business meeting their objectives. If that does not happen, there is no bonus, irrespective of how an individual performs" OK, but please read my post - who exactly is going to work for nothing to get the money back to repay the govt debt?

"The banking industry is in crisis due to its own self-serving arrogance" Ah, scum then... "and to expect the tax payer to foot the bill for an individual's bonus regardless of the financial robustness of the business (Northern Rock!!!!!) is quite frankly disgraceful." OK, but how exactly do you propose to solve the crisis without paying them enough for them to decide it is worthwhile for them to do so?

***

FWIW my gut feeling about all of those really huge mega-millions bonuses has always been WTF? too...

Now I have seen teams earn, say £100m after costs for their bank, without risking the banks capital and without doing dodgy deals, and without leaving anything on the balance sheet ready to blow up. And when the head of that team takes home, say £2m at the end of the year I am jealous as hell, sure, but I kinda think the shareholders got a good deal out of that. And I still fail to see a huge problem with that. But, when people started slicing up the pie and taking tens of millions? I have to say that this didn't make any sense to me at all.

Saying that, the numbers may be disgusting compared to a nurse's salary (of course they are), but (a) it gets spent, so creates waves of wealth further down, and (b) this country decided long ago to embrace capitalism and is not Cuba. we simply do not live in a meritocracy in the UK. If we don't like the wealth distribution it is the responsibility of all of us to act politically to remove it. We ditched progressive tax bands at the top level long long ago - if we want them back we need to get off our backsides and do something to make our bit of world fairer.

This seems to have moved into a "are they worth it" argument. As far as I'm concerned, a business can spend its profits how it chooses. But if these highly educated and skillful people aren't bringing enough money into the business for it to survive without a taxpayer handout then perhaps said taxpayers shouldn't be funding their massive bonuses. That's all.

I agree with you completely oh madonna one. The question is do you stop the pay of those who have made money (without threatening the stability of the bank), or do you tar them all with the same brush?

It's exactly the same as Foxtons - the agency as a whole lost shedloads of money, so do you stop the individual agents who closed deals from picking up their commissions? (I accept by the way that they are unlikely to be bailed out by the govt , I am just trying to explain that you have to look at the parts and not just the sum of the parts)

I am not saying that bankers in general are nice people (there are way more prats than average in the industry - more even than in Foxtons), nor that other people aren't equally capable of doing our jobs, but seriously, who would want to? When I talk about my £10 left, I am not including stuff like my mortgage payments, my council tax. my standing orders. If I add them in I am seriously underwater. Who in all serious would do the job?

I don't think it's "are they worth it" as much as a combination of greed and envy.

A more relevant debate I think is what role we want the banks to play. the reason they have been bailed out is because without a functioning clearing bank system the whole economy would grind to a halt. Lehman's was not a clearing bank, RBS is.

If we are then going, as a society, to decide that clearing banks are a public service utility - similar to water companies or electricity companies, then the regulation of them probably needs to be different to allow for the fact that they will not be allowed to fail - and therefore shouldn't be allowed to take the sort of risks that might cause them to fail.

The downside to this is that by curtailing the risk taking you also curtail the opportunities for profit - and it's these profits that funded the utility services of the banking system.

We have all got used to free banking, to free cheque clearance, to free ATMs - none of these services can be provided for free by the banks - they have to be paid for somewhere. At present they are paid for by the difference between saving and mortgage rates - currently under pressure because of the historically low interest rate; by bank charges for overdrawn customers - under pressure because of the OFT/FSA; and by trading profits. If you remove any possibility of trading profits then you will almost certainly need to reconsider whether free banking is sustainable.

To quote Squiffy : "Saying that, the numbers may be disgusting compared to a nurse's salary (of course they are), but (a) it gets spent, so creates waves of wealth further down, and (b) this country decided long ago to embrace capitalism and is not Cuba. we simply do not live in a meritocracy in the UK. If we don't like the wealth distribution it is the responsibility of all of us to act politically to remove it."

That is it exactly: Your argument shows a total lack of moral values and a demonstration that you believe you are superior to a lowly nurse. No-one deserves to have the extreme amount of money doled out - when compared to others who also live in the 'meritocracy'. Period.

To quote Squiffy: "We simply do not live in a meritocracy in the UK..."

well having worked in the financial sector for many years, in both the city and canary wharf, I can honestly say hand on heart that these people are not harder working or more intelligent than stacks of people earning less.

Where they differ (in the majority) is that they honestly believe that money is the most important thing there is, they are grasping and show-offy, they are arrogant and unpleasant. It was all 3 hour lunches on expenses, doing sod all actual work and just swanning around.

The company I worked for posted well in excess of ?3.5 billion profit in 2007 and how much do you think they gave to charity in the UK? Nothing. At all. We sat in our ivory tower and looked down on all the surrounding very poor areas and happily set about making as much money as possible, just for us. It was obscene.

i did not enjoy working in that environment, in fact I hated it, and am now a lot happier working in a more modestly paid local job where I can feel that i am doing some good.

I agree tumtumtetum. I don't know how they can square their conscience with taking an obscene amount of money. I think they should give most of it to charity.

The thing is none of them seem happy and I really mean that. My ex husband was an analyst and had a 2.2 degree in economics, earnt an average salary but of course got bonus'.
They all seemed on a mission to prove who had the biggest dick via cars, houses, wives even.
I can honestly say they had no more intelligence than your average man in the street but they work hard and that's I guess what being born free is about, seeing an opportunity and seizing it.
I'm afraid the rhyming slang merchant banker is spot on though.

How they square it (IME) is by genuinely believing that they are more intelligent and hardworking than everyone else.

They really look down on people who are less well off, if they think about them at all, which they try not to do.

The vast majority of the people I worked with really resented paying any taxes at all and thought the welfare state should be abolished. After all anyone can earn plenty of money if only they put their mind to it, right? People who aren't earning are just lazy and/or thick, and why should they have to hand over their hard earned (!) cash to them.

I expect they can't understand that some people think that there are more important things in life than money.

I think that most have just lost sight of what other people actually earn. there was that thing on the tv a while back where they interviewed a load of bankers and asked them things like what did they think the average salary was and they were very much not in touch with reality...