Should bankers repay bonuses?
Here's the argument for why no senior banker should receive a bonus, perhaps for several years.
This is not to say that all bonuses are the devil's currency and should be outlawed.
But it's about the idea that a bonus should be a reward for exceptional performance.
And the reality is that there is no big bank in the western hemisphere whose share price hasn't fallen in the past 18 months.
In other words, the senior executives of our banks have been responsible for the destruction of wealth (the wealth of anyone whose pension scheme is invested in shares) on an unprecedented, mind-blowing scale.
Since the owners of banks have been impoverished (and, to repeat, millions saving for retirement are owners of banks), it's very difficult to see how senior executives of banks should receive a penny of bonus.
There's a double argument why über-bankers should not be paid even a farthing of performance-related remuneration - and this argument can be extrapolated from no less august a source than the recent magisterial speech by Adair Turner, chairman of the Financial Services Authority.
It's that almost every senior banker trousered bonuses over the previous few years on the basis of profits that turn out to be a chimera, an illusion, unreal.
The point - which is implicit in Turner's analysis - is that banks' wholesale banking and treasury operations booked as profit both capital gain and income from assets that have subsequently turned out to be poisonous.
Much of this capital gain never crystallised, it was not converted into cash. Yet bonuses - in the form of hard cash and shares - were paid out on the basis of this nebulous capital gain.
Over the past 18 months, these assets - the collateralised debt obligations, the credit default swaps, and so on - have generated mind-bogglingly huge capital losses, which have hobbled not only individual banks but the entire global financial economy. And the global recession is the malign progeny of this banking disaster.
So if bonuses are really supposed to be generated by exceptional performance, bankers should now be paying money back to their organisations.
Which means that almost any senior banker who feels that he or she deserves to be paid more than their basic salaries (and these salaries are not trivial) may not be living on the same planet as the rest of us.
I'm 
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The Centre for Economics and Business Research calculates that U.K. bankers alone have reaped more than 31 billion pounds in bonuses over the past four years.
That’s GBP 31,000,000,000. Personal pay. On top of salary.
With no personal risk. And no personal financial investment. In 48 months.
I find it difficult regard this amount of money arriving in bankers personal pockets in such a short time as other than a misappropriation of the assets of the non-banking community, whether legal or not. While technically legal, SIVs, derivatives, CDSs, the off balance sheet charade, and the blind eyes willfully turned to risk management have purposely made a farce of moral hazard and regulation. Regulation that was not the enemy of so called free enterprise, but regulation that was put in place on behalf of society to stop the very things that have happened and to provide stability to a system on which all of us are dependant.
Each and every one of us (and that will include our children) is being forced through taxes to recapitalise banks which are crippled in part because so much cash has been taken out by the people who work(ed) there, and in part because the so called assets created by the bankers (paid commission up front) turn out suddenly to actually be worth pence in the pound.
I deeply resent the economic carnage and personal pain this has caused, and will continue to cause to the people around me and the country I live in. And it is utterly galling that in such a short time many bankers have become rich forever on the proceeds of the very deals we are all having to pay for now.
It is time as a society to decide whether we will tolerate inactively such pain for the many for the excesses of so few. Excesses made in breach of the spirit, if not the letter, of regulation and fiduciary duties owed. It is time to decide whether these same bankers should be publicly shamed or legislated into returning at least a proportion of enormous amount of money extracted up front from deals which have proven cataclysmic for everyone else.
I suggest a six year retrospective tax hike to 50 per cent on all bonuses up to GBP 2 million, and 75 per cent over that. Fair? After all, we are all being asked to retrospectively pay for these excessive bonuses by government borrowing on our behalf to get capital back into the banks.
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Thank Robert,
Great Post.
But you don't mention:
1) The bankers repaying the Billions (yes Billions) of Pounds they have personally taken from us taxpayers in bonuses before our taxpayer infusion.
Normally, we could never morally ask for historical bonuses back, but in this case both the scale of the bonuses, the greed of the bankers, and the rage in this country justify it in this case (better than a UK revolution).
2) Maybe the shareholders have lost enormously, but the shares should be worth zero now, and without Government backing with our taxpayer's money they would be. So we as taxpayers have effectively paid the shareholders Billions of pounds so that their losses are capped. Poor us, and ultimately lucky shareholders
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Why yet another blog on bonuses and bankers immediately after the last one?
Tell us something we don't know please.
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In banking as in business more generally, executive returns should be linked directly to shareholder returns. Given falls in share prices, no bank - and few other companies - can justifiably pay anyone a bonus in the present circumstances.
Moreover, there should be NO bonus payments from any bank (or other company) which has been bailed out by the taxpayer. This is what Obama is saying, since his $500,000 cap is below most senior execs' basic salaries, so by definition effectively bans bonuses.
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Willem Buiter's column in the Mavercom blog well worth are read
http://blogs.ft.com/maverecon/2009/02/fiscal-expansions-in-submerging-markets-the-case-of-the-usa-and-the-uk/#more-428
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If bonuses are paid to staff working at any of the "nationalised" bansk - ie, HBOS, N Rock, RBS/NATWEST then I would think long and hard about withholding my taxes. Seriously - its a complete joke.
I do not work 10 and 12 hour days, 6 or more days a week, trying to build up my own business just to see my hard earned cash being used to pay a BONUS to these loss-making, financially incompenent, 9-5 failures.
Hindsight is a wonderful thing - and i accept many bank staff were not "in the know", but the fact remains these companies are as insolvent as woolies / jaguar/zAvvi etc etc - its just that they work for banks, and they have been bailed out by us taxpayers.
Never mind a payout - they should all be downgraded to public sector pay scales - bank staff earning the same as other council clerical staff, such as school admin staff, hospital workers etc.
They have no shame.....
It really would be a scandal - surely there is some kind of veto available to the treasury ???
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This comment was removed because the moderators found it broke the House Rules.
You don't have to worry about bank robbers outside of the banks now, the robbers have moved inside, much, easier and no one comes looking for you, not even the FSA
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Unfortunately it isn't just bankers.
The bonus culture cuts across all walks of life especially in the public sector.
No longer do you receive an appropriate salary for the job you are supposed to do you are given a bonus if you are proven not to be an idiot and can actually do that job.
Does anyone wonder why this country is no longer competitive and in such a sorry state.
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Savers being penalised by 1% savings rates= my suggestion.
Withdraw all your cash , bury it in the garden and claim means tested benefits!
To earn the equivilent of the dole from savings interest at 1 % you would need £342,000 in the bank.
(342,000 @1% = 3432pa or £66 per week)
To pay Council Tax from savings interest at 1% you would need £15,000 in the bank
(£150,000 @ 1% = £1500 pa
ROBERT if you do read your blogs I would be interested in your moral (not legal!) opinion of a saver doing just this.
Dole Bludging - the new prudence!
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Yes, they should... End of!
... and by "bankers", I mean anyone employed by a bank who has recieved >=10% or ANYONE emploed by a nationalised bank!
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Best Blog Ever!
Why aren't share holders kicking up a bigger fuss about bonuses???
You have to pay big bonuses to stop talent leaving???
And going where exactly???
About time Share holders started prosecuting banking executives for the stealing their companies...
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I absolutely agree that bankers should repay their bonuses. they made their money out of the biggest con trick of all time.
I have argued for a long time that we had phoney capitalism. Capitalism is supposed to reward effort and good results - a universe away from what the bankers achieved. They did a good job of bringing down the global financial system. I would suggest keeping their basic salaries was more than a reward.
I am surprised they are not all being sued but maybe that is yet to come....
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the key is to give bonuses for performance over and above what you get paid for doing, but not in cash....pay them in company stock, not redeemable for five years, this gives the management the incentive to stop taking short term decisions just to meet this years bonus. It will mean they have to manage the company well so that in five years time the share price has a value...the better they do the bigger the bonus!
As all the past bonuses were effectively taken under "false pretences" it was surely fraud and the FSA should fine all bank directors an equivalent sum..
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--- POSITIVE NEWS ------
A bit off topic but I for one am convinced that all the negative reporting over the last 18 months has been a key factor in the eroded confidence which has contributed to the recession.
So a few things to point out from browsing the news today:
- Shares are up - around 15% from their lows in December
- Buffett is reinvesting again - a decent sign that we've reached the low
- The pound is bouncing back strongly - up around 10% on the dollar, Euro and other currencies in the last month or so.
And most positively from an overall economy perspective (though not necessarily from everyone's point of view) - Halifax reported a rise in House prices last month.
I know it's only one data point, it contrasts with Nationwide and all the other arguments but there are several small signs of life being breathed back into the market in both the UK and US. House prices crashes largely triggered the present situation and it won't be resolved until they at least stop falling so this is definitely the most positive sign I've seen in months.
Now what was that about green shoots????
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according to Tessa Jowell though, it would be a
populist move to take the bonuses back, but would
be bad in the long term, I wonder why exactly?
seriously though I doubt any of the money that
has been stashed away, will be repaid, because the
same ministers on all sides of the house are
connected on some shape or form to banks or
financial institutions, just look at Teflon Tony, who
still manages to stay below the radar, when in
truth a lot of this is on his shoulders too!
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Bank performances over the past 2 years have been "window dressed" to justify senior staff bonuses.
At the very least such bonuses should be relinquished.
The question of fining banks and/or individuals does not apply - unless we scrouge the PM, the Chancellor and the IMF as well.
The phrase "as safe as the Bank of England" is now little more than an old wife's tale.
I'm no Labour supporter, but is the way forward to nationalise all banks operating in the UK?
Stronger fiscal restraints in Britain are also required, probably with the strong disapproval of the international community.
Never again can we allow any financial institution to be run like a bookmaker's shop. Probity must be the watch word.
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There is a simple reason why Bankers pay should not be related to performance.
They cannot be trusted with the taxpayers and savers money and sadly as recent evidence shows many Bankers are incompetent and in some cases dishonest.
Clever arguments will be aired in defence but the bottom line is, the penalty must be paid.
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There is also the small but to this tax payers mind significant point that these bonuses would be funded by tax payers money.
Why should we "little people" who work hard in the real economy fund these ex-masters of the universe?
I have yet to see any of these over paid, arrogant, parasitical, wasters on tv or radio saying sorry for the wholesale destruction of our savings and pensions.
If they don'ylike not getting a bonus they can always leave and try and get a real job in the real economy.
A year on no salary would also be a good idea - unlike the rest of us they can afford it.
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glad to see that you've survived your appearance at Westminster yesterday and even feel emboldened enough to kick a few banksters while they are down
go get 'em Bob
more generally, there is an interesting piece of analysis in today's Globe and Mail about the next moves that might come out of Washington next week; I mentioned this on Stephanomics but as an equal opportunity blogger here it is again:
http://www.theglobeandmail.com/servlet/story/RTGAM.20090204.wbanks_obama05/BNStory/Front
they suggest that something big may be about to happen, including a $3tn BAD BANK, the winding-up of zombie banks, some nationalisations, big tax rebates for house buyers etc
I was particularly interested in what might happen if the US do go for a BAD BANK and put $3tn of toxic stuff in it, given that Barclays and RBS, amongst others, are listed on the NY Stock Exchange; does the US taxpayer take care of RBS etc for us? or does the UK have to co-ordinate action with the US, effectively dividing up the toxic shares?
after all the US/Wall St and UK/City of London markets are intertwined, perhaps to the point policy moves have to take place in concert?
And what about the share prices of our zombie banks? if a BAD BANK was set up and the toxic stuff removed, would RBS, Lloyds and Barclays shares - freed of their toxicity - suddenly shoot up from 20p like a helium balloon? giving the RBS etc execs a huge potential windfall on their bonus shares?
hopefully that would not be allowed to happen but how? suspend the RBS shares ahead of the announcement of a BAD BANK? seems like there is great potential for speculators to run wild but I haven't seen any discussion of these issues for us ordinary civilians
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Robert it will also be interesting to find out how much Bonuses were paid to the
senior Mgt of the four big banks in the last two years and where all this money is, if it is
invested in this country or in a offshore Bank Account!
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Show me a government who will
introduce legislation to outlaw bonus payments for mythical profits
i.e. the wheezes recently perpetrated by the finance fraternity
and I will vote for it.
Show me a financier who can get us out of this mess
reduce the pain for everyone
and he can have his bonus gladly.
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Not only should no one in the banking or financial regulatory sectors receive any bonuses for the next few years, they should be hit with windfall taxes (100%) covering the period over which these stupid idiots setup and ran the policies that resulted in the present situation. In addition to this, thorough investigations should take place with a view to criminal and civil action being taken “pour encourager les autres”.
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I think you are refering to sheer-prices?
However, I don't think anyone expects vast bonus' for those at the very top. However mid ranking Banksters can still get up to a £1 million quid or so - are these justified this year given they would have recieved nothing if their employer had gone bust?
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DING DING.
The gloves are off and Pummel Peston has come out swinging!
Someone rub you up the wrong way yesterday me old fruit?
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Not only should the bonus be returned but they should be prosecuted for defrauding the government and the people. Some of the bonuses are more than most people will make in two lifetimes. It is obsene at best.
Need to go back to tarring and feathering scoundrals.
[Unsuitable/Broken URL removed by Moderator]
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Is there anyone who does NOT agree with this analysis??
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Spot on Robert.
No bonuses except for performance.
This could mean that at branch level for example some bonus may be paid but again only for performance and I mean REAL performance not some trumped up reason to pay!
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Why did'nt anyone else think of this!!!
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It will be interesting if the government includes itself in the no dividend for shareholders argument.
I suspect not.
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Easy answer. Yes.
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The government simply don't have the cojonas to instruct the banks not to pay bonuses, and as a result the banks will remunerate their top players as per usual.
Go down the road of asking them to pay previous bonuses back, and the only winners of that argument are the pockets of lawyers.
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RP, respectfully (genuinely) i think you are making the economist mistake of assuming that we all act rationally and so salary and bonuses are a reward for performance.
This is not the case with banks
They have all played the "carrot" game that by paying a few average people large sums of money the majority of hard working employees will think that maybe the will receive such large sums one day.
If large bonuses only went to people who were exceptional this would dissolution the rest of the staff who will feel they will never have the attributes to have such a high position ( or so the theory goes)
If i could suggest that you write a blog to bring to attention what seems to be a clear concensus from your bloggers, i.e. it is totally frustrating that there is seemingly no aggressive investigation into finding wrongdoers and bring action against them. whether they be bankers, auditors, rating agencies, authorities etc
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It's very frustrating. These bankers have ruined the economy for all of us. It's like the rug has been pulled out from under the global financial system.
The problem is that we need the skills of the banking bosses to help fix the system. They are in demand and therefore expect to be paid. Unless they show some kindness to the suffering masses, this will continue.
As I see it, we elect a government because we feel they will represent all of our interests. The regulators job was to represent the interests of the average saver. They failed in this duty which means the government let down Britain's savers. It is now using money for schools and hospitals to shore up the banking system.
We need a government with backbone. One that doesn't get mesmerised by huge tax receipts from the City. One that implements fair rules for the financial sector that protect the providers of funds. One that stands up to fat cats. Problem is we don't have one now and I don't think we have one in opposition, but we need an election to find out.
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Good to see you're not languishing in the Tower,
Robert. Wonder who next will be "hauled" in front of a Select Committee. Could well be our Weather Girls - accused of reporting, and thus causing, the snow and ice that has brought much business to a standstill over the past few days. I liked the report that claimed your bag had been searched and no incriminating evidence found . "Nothing to declare but his genius ". The entire comic saga
beggars belief, but did provide a little light relief
in the financial gloom. Thank you Robert. Have
a happy evening - you've earned it.
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Banker's bonuses are just the tip of the iceberg.
Greed is in every facet of commercial life.
The UK's football league is one such example whereby wealth is disproportionally distributed to a small number of people.
The argument that we can't cap wages because it makes us uncompetitive is nonsense.
Let's lead the way and introduce some sort of limits. I'm not saying become socialists or communists but lets agree on a maximum figure that individuals can remunerate and accumulate.
Its not sensible to have a small number of people in charge of most of the wealth.
Politicians need to take action and business and the wider community need to lobby on these issues.
Jason Pitt
editor
Business Report - West Midlands
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at 17:06 35 posts awaiting moderation....so no bonus here then...!
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Who would sign off on any potential bonuses?
Surely there are internal rules in the banks that specify x% bonus if y profit is achieved or z% return on equity?
I'm sure such rules would result in zero bonus across the board.
Maybe we want to think they might award themselves a bonus because we enjoy getting cross about it!!!
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bonus payments should be banned in all sectors not just banking.
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''''''''''And the reality is that there is no big bank in the western hemisphere whose share price hasn't fallen in the past 18 months.
In other words, the senior executives of our banks have been responsible for the destruction of wealth (the wealth of anyone whose pension scheme is invested in shares) on an unprecedented, mind-blowing scale.'''''''
Thats ric coming from you!
On Newsnight last night Paxman inetrviewed a couple of people an economist and a media buisness reporter was interviewed the economist stated that it was rumoured that 'certain' journalists may have been persuaded by a 'certain' government to print damaging leaks that drove down the price of bank shares prior to said 'certain' government buying stakes in said banks
Ring any bells Robert?
PS why didnt you turn up on the show Paxman it seems was expecting you to defend yourself, his simple 'Robert Peston cant be here tonight' didnt fully explain matters
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Banks got into this mess by their short term bonus incentives. At BoS their integrated finance operation was bonused inthe following way: Entirely on the arrangement fee that the bank charged based on the amount of money lent. Therefore the more money out of the door the bigger the bonus. No deferral for performance, therefore the more deals done in a year the bigger the bonus.
As any corporate finance adviser can tell you, any deal that BoS were doing the only part of the deal that was not negotiable was the arrangement fee as that was what drove bonuses.
One deal they did, of a housebuilder = BoS outbid a trade buyer for the company (a foolish thing for a financial buyer to do), but didn't only just beat the trade buyer but paid 20% more. During the DD process, the venders worked out that on the company's land bank BoS were paying 5 times the value, so they did what any smart person would do. They bought another £2m of land, which 6 weeks later BoS effectively paid £10m on top of the agreed price for the business.
Utter, Utter Madness.
All driven by the bonus structure.
Now bonuses can be very good, for individuals, and the company. But only if they are structured correctly. Bonuses are the right way of remunerating the people who generate the wealth of a company. If a company makes good profits, the people who deliver the profits deserve the extra financial reward. Likewise if the business only just makes budget - no bonuses. In my company I gave larger bonuses to some of my employees than myself - becasue they don't own my company but they helped deliver a good financial result.
For a bank any bonus should be dripped out over the life of the loan or exposure. Therefore if a banker makes a great 5 year loan today, that repays on time, etc etc. His bonus should be paid out over the 5 years, starting 1 year after commencement.
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"It's that almost every senior banker trousered bonuses over the previous few years on the basis of profits that turn out to be a chimera, an illusion, unreal"
So in fact an act of fraud or at the least theft.
So as I have asked every day for the past few weeks...has any banker been arrested and charged yet...answer no of course not. Nobody is going to do anything, no bonuses will be paid back, no government official will speak out. What a bunch of losers. We really do deserve better than this bunch of lily livered excuses for public figures.
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The bankers should be fined and forced to pay back some of their wealth!!i say this as a share holder and bank customer!
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Robert - agree with the sentiment of your comments, but you are linking bonuses to share price not to profit.
For one bank (Barclays) if they announce what they have been threatening to announce next week, then there is a reasoned argument that they have produced the goods, and its market sentiment (ie out of their short to medium term control) that has driven their share price to disproportionally low levels
So profits in 07 - about £7bn. Share price - about £7
Profits in 08 - about £5.5 - 6bn. Share price - teetering around £1.
Go figure
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Yawn.
Snore.
Turns over.
Realises everything that's been said here over the last four months are juust a bad dream.
Goes back to sleep.
Like Peston.
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As somone facing redundancy because of the actions of these bankers, I would like to suggest that they be tried for corporate manslaughter...after all their actions are leading to the death of many businesses.
Alternatively, let's round them up in the square mile, gather all the people who have lost their jobs or lost money from their pensions because of their actions and let the bankers explain to those people why they were worth those hugely inflated bonuses.
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Bob, I totally agree.
Unfortunately, this leaves me with little to post here....
No way I can turn it into a rant about, well anything really.....
Well said....
So I take it this is purely conjecture and we will not be getting anything back from them? Shame....
I blame Gordon Brown. Probably.
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Have bankers obtained a pecuniary advantage by deception? Has any banker dishonestly given information or made any statement which knowingly or recklessly was untrue or misleading and intend by doing so to make a gain for themselves or another or cause loss or the risk of loss to another?
It is not good enough for politicians to say as they did with the Insurance Industry scandal, lessons must be learned and it will all be different going forward.
It is not good enough for the FSA to do nothing.
These people have brought the world to ruin.
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A few key questions arise in the debate about bank bonuses:
1. Suppose a trader in a profitable bank makes a net profit for the bank of $50m using his own trading skills and the bank's capital and systems. How much of that $50m should be given to the trader as remuneration and how much should be retained by the shareholders?
2. Is the answer in question 1 different if the bank's other activities, completely unconnected to the trader, make a net loss of $500m?
3, Would it make a difference if the trader began his year on a hypothetical salary of, say, $1m pa but was only paid monthly cash amounts at the rate of $100,000 pa, with the balance of $0.9m only being paid if profit targets are met? In this way the trader would effectively share the pain if profit targets are missed.
4. Are the answers to 1 - 3 different in the context of a banker earning for his bank a deal-related fee of 0.5% x $10 billion or should all such work be charged to the client at an hourly rate?
5. Under Obama's proposal to cap "executive" pay, who is an executive? Is it senior management or does it include all staff?
6. Is it morally wrong to provide incentives to staff (eg at Northern Rock) for achieving specific targets? Does this morality metamorphose into acceptability when applied, say, to sportsmen for winning a competition or gaining promotion?
7. Who should determine the level at which a proportion of salary deferred and paid once per year changes to become an unacceptable bonus? This type of approach is common for back office staff at banks but is it morally acceptable?
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Of course the bankers should repay their bonuses but they will not have the cash- they will have spent it . What they will have is a pension fund- and we should have that.
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My Goodness Robert, never thought I would feel the need to mention you and author Frederick Forysth in the same sentence.
This "repay the bonuses" proposition was made by Mr Forsyth on the BBC's Daily Politics on Tuesday ......
..... but the prospect of such a thing happening was LITERALLY laughed at, as out of the question, by the government minister present; the ever-irritating Ms Tessa Jowell.
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So make the board responsible for the bonuses - and ensure that they have to be repaid is at any time in the future the deals turn out to be bad.
How can youi have a system than pays out huge bonuses if you overperform and gets nothing back if you lose money? Where is the risk in that.
Greenspan said he was surprised as he thought the banks self-interest would keep them prudent. He obviously didn't consider the bankers self interest did he????????
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Any sensible business only pays out bonuses out of cash not out of paper profits, if a bank was lending money to a medium sized manufacturer they would not expect salesmen to earn their bonus until they had receive the cash for the sale, the same commensense rule should exist in all businesses including banks.
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Barack Obama is absolutely right to cap chief executive salaries in the finance sector where their failures in management led to public funds being required to bail them out.
But more generally, if the President of the world's leading country is paid under half a million $ a year, is anyone else worth more? Business leaders claim they are paid for their talent, and if they don' get stratospheric salaries, they will go elsewhere. Well let them, if that is the only factor securing their loyalty, then it is worthless.
The claim that bosses are rewarded for their skills is blatant nonesense. No-one fights their way to the top of power structures by talent. What gets them there is greed, ruthlessness, ambition and luck. If these are the kind of people running our major businesses, in my opinion it is urgent that they be paid ordinary salaries. At least that would take one of the elements out of the essential mix for business success.
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Robert,
While I'm in total agreement with the intent and your conclusions, Chimera???Other uses, but none really what you intended...Give the bankers Share options as an alternative to bonuses, but price them at the median price for the twelve months ending last July. They can tyhen exercise the options when the shares have recovered...
Peace and equity
ed
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YES ROBERT!
You've hit the nail on the head.
The whole country is infuriated with the greedy, incompetent, negligent bankers.
They have failed miserably, but enriched themselves massively.
Justice must be done.
Cameron knows what to do with them.
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All banking bonuses (assuming there should even be any) should be in the form of share options in the company, with a strike price equal to the market price at the time of issue, and which can only be exercised after three years or more.
But let's not forget, the issue is not just with remuneration - it's the selection criteria followed by banks' HR departments.
It's well known that banks actively seek out the repugnant, greedy and more aggressive applicants, whilst overlooking any which display a modicum of restraint and responsibility.
There is your fundamental flaw.
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if a bank had to borrow billions or millions from the government then their staff should automatically lose any rights to bonuses for that year.
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Bonuses for Senior Bankers:
How about 5 years in prison instead!!!!
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So I'm an employee in a Financial Services company.
I'm set a target.
I don't set the rules.
I'm offered a bonus for meeting that target.
This is part of my contract of employment.
I exceed that target.
A year later I put my hand out for the money I've worked for, my company agreed to pay and which is due under my contract.
My company is now entitled, thanks to Mr Obama and Mr Brown, to pocket the money I earned and which is due to me.
All in the name of fairness!
I'm sure the unions would be marching everyone out the door if it was done in manufacturing.
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60 posts and not one has been moderated. What`s going on here - have the BBC moderators gone on a wildcat strike????
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When the US company I worked for went into Chapter 11, the new CEO came on board( an internal promotion) to turn the business round at zero salary and no bonuses. He had some very demanding financial targets to meet in order for him to get something when the restructuring was successful and the business was sold as going concern. This motivated all the work force, mollified the creditors and shareholders, who in the end did get some sort of pay out, and put out the message that he was there to do the right thing rather than feather his nest as his predecessors had. Would that the senior management of the UK's failed banks would do that sort of thing voluntarily rather than having to be shamed into it.
But lets keep on shaming them.
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Wasn't the downfall of Enron because they used the accounting principle that as soon as a contract was signed they could post the predicted profits as real profits in the P&L. If any of these contracts didn't make as much profit (if any) on realisation they then got shunted into dummy off-balance sheet companies to hide the losses.
How is that different to now?
The banks posted profits based on expected future profits using M to M valuations and loss making ventures were packaged up, given a different name and sold on to unsuspecting investors.
The heads of Enron were jailed and fined, hint hint.
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So why do companies offer bonuses?
To attract the best employees/managers.
To ensure they only pay them when they have earned the company the money to pay them from.
What this witch-hunt will do is ensure nationalised banks get the dregs of the employment pool - ensuring that HSBC, Barclays and the like open up a competitive advantage.
That's why nationalisation never works. Wrapping people in red tape and not offering the right carrot always results in lower performance - and it's just as true in a recession as any other time.
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Robert I am surprised you are only coming to this conclusion now. Some of us on here have been harping on about this for months.
All the talk from government and ex bankers and the like has been very mild and measured. They hardly want to bite the hand that feeds/fed them.
For the rest of society its a no-brainer that the bonus money should be returned. A lot of us would go a lot further and actually jail those heads of banks who have destroyed our economy.
Failure to do so will sow the grapes of wrath amongst those people who have lost their homes and jobs.
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It's a tonic to read this blog, you make a great case for bankers not only paying the money back but recognising their sharp practices and understanding that their game is well and truly up.
If not, then what's to stop anyone placing bets on any horse at the Grand National at 100-1 and taking the money, even if the horse falls at the first fence?
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And you're absolutely right Robert.
The "profits" which these bonuses were paid on never existed.
They were hypothetical.
They were based on ridiculous "supposed" asset values.
The bankers were just brewing up catastrophic losses, which have been passed to us.
All these bonuses were paid under false pretences.
And there are a few accountants that need examination.
Urgent public inquiry needed. Brown is frightened of it...it will expose his incompetence as well.
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directors- zero, plus prosecution for fraud / negligence, and reclaim any bonuses paid under false pretences.
traders- pay based on genuine realised profits, not on paper profit.
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Surely the principle should be: If we make a profit, and your performance contributed to that, you will get a bonus. If we make a loss, and your performance contributed to that, you will be asked to forfeit some of your salary.
Until reward and risk are properly tied together, we can never be certain that leading bankers will not put earning their bonuses ahead of common-sense and prudent behaviour.
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Well said. Those responsible should either repay their bonuses or be charged - it is ridiculous to suggest that notd one of those executives knew what was going on. Like so many Directors, executive and non-executive they were hoping that they would retired and living it up far from the City when the balloon eventually went up.
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hello,i really enjoy the business reports,they are excellent.i think northern rock should have been allowed to fail,it is meant to be a free market.it would have been harsh on some savers,but it might may have prevented the total meltdown we have now.my question would be what would have happened if the banks had not been bailed out?.
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Robert - it's simple really.
If you continue to pay people with performance related bonuses then we will continue to have the peaks, troughs and corruption within our Economy.
I don't know why this is even up for debate. I suppose because if the world eventually wakes up to the fact that performance related bonuses encourage risk taking and corner cutting (which then lead to booms and busts within the Economy) - then it would logically follow that competition is NOT the most efficient basis on which to develop and run your economy (which every western country has to one degree or another)
At that point we would see that the people who work at the top are not there on merit, but merely the suggestion or impression of merit.
Anyone who has worked on a used car-lot, or any other pressure sales job will know perfectly well that competition eventually leads to inefficiency and more importantly that it's not the best salesman who sells the most but rather the salesman who is prepared to stiff his colleagues in order to get ahead.
Banking is no different - if you think you can outperform your peers, then you will go for CDO's and SIV's and other investments that appear to offer higher returns.
Answer this:
How could a man with NO BANKING EXPERIENCE get a job running one of the biggest mortgage lenders in Britain (Sir Tom McKillop)?
What happened at RBS was a disgrace - and yet inevitable as the man at the top had no idea what he was doing.
....but with all good businesses, they're easy to manage during boom time.
Where was the due dilligence on his appointment. They could at least have got someone who works in a bank!
Best of all I saw Mr Peston was hauled in front of MP's who seek to blame him for the run on Northern Rock.
I hope you gave them the finger and pointed out to their dim minds (because MP's no nothing about the economy) that the ONLY PLACE THE BLAME LIES IS BETWEEN THE GOVERNMENT, THE FSA and THE MUPPETS WHO RUN THE BANKS.
Robert - next time they haul you up in front of MP's for questions then please take me along. I have some questions for those MP's myself - just some simple ones which will expose them as the frauds they are.
No wonder the bankers have been making hay - the fat controllers (the MPs) have no idea - but having said that - nordo the bankers!
...I'm just waiting for the people to work it out - and then we shall see what happens....
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Come on Robert, you are supposed to be the BBC BUSINESS Editor. Yet all we get is banks, banks and yet more banks!!!!!
Start devlving into the role in this mess played by UK multinats or how debt ffunding has crippled business or executive pay for comapny failure.
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Increasingly, the whole system looks like smoke and mirrors, and in the US, our Constitution is being shredded.
Here follows a chilling account of what prompted B of A to acquire Merrill-Lynch.
http://tinyurl.com/agkt63
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Dear Robert
Not only are bankers living on a different planet but sadly, I fear, so are you if you seriously think that:-
a.the bankers are going to stop paying themselves bonuses-who's to stop them?
b.they would actually pay anything back!
Bankers do not become bankers for the general good of society-and don't talk about 'growth'-they become bankers because generally they are greedy, self centred and arrogant.
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Could not agree with Robert's blog more.
I genuinely wonder why Peter Mandelson or Gordon Brown have not expressed exactly the same sentiment.
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Instead of bitching about bankers who made money, through our greed, for lets face it had the general public not wanted to buy property there would not have been sublime (error intended) mortgages. There are also the estate agents who made bucketfuls of money selling price inflated houses, are we to take back their bonus.
Then we can look at supermarkets and ask about the directors bonuses, for all they do is collect food from a farmer and distribute it, managing to rip the farmer off and the customer along the way. Or do we wait until through their greed the food distribution systems collapses and then take back the bonus.
Or Prime Ministers who destroy countries, both there own (UK) and others (Iraq). Do we take back their big paydays as bank directors and on lecture circuits.
It seems to me there are a lot of bonus payments for people who fail, but that's alright as long as you do not use the word gollywog as then you really are in trouble.
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It's interesting that the bosses of Merril Lynch in the US, knowing what was going on with their bank, decided to bring their bonuses forward a month early.
It is obvious they did this to stop them from being unable to claim them post-bail-out.
Very devious, wouldn't you say.
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Bankerrs bonuses should be swapped for the toxic waste they created at book value [mark to model] even if it means using rubber gloves and a long rubber tube and wide funnel .
And since we are on the subject of justice we can do the same for the FSA ,the AAAAccountants and the Pied piper of Sedgefield without whom this free [at point of laughing ]entertainment would not be possible .
The bankerrs took bonuses on knowingly toxic products deliberately burried off balance sheet ,that pushed through the system the previously created tripe[once hidden] by inflateing asset prices another notch on the ratchet to the point of allowing the earlier product emmerging years later, to appear comparratively sweet smelling seillage by comparrisson .
Modern capitalism[the right of fools to create money from thin AAAir, backed by corrupt central banks has ruined the functioning of a free market economy by distorting prices through allowing the leveraging of large ammounts of money created from thin AAAir with small ammounts of privately held manipulative capital that over traded its position for its own gain whilst transferring great risk now self evident to the general economy [with the conscious conivance of central banks ,and their political authorities guaranteed a job for life later]
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I fully agree with Robert. Many if not most senior bankers and many other senior staff have been living high off the hog for years. They create no value whatsoever, take huge bonusses, are largely responsible for the global crisis and want a public bail out. Many of them should be sent to prison for fraud and made to repay the last 10 years bonusses.
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There is plenty of talk about the best solution to our economic problems, but no discussion of the ethical questions. First, savers who have not lived beyond their means are currently subsidising spenders some of whom have bought houses they couldn't afford or enjoyed expensive holidays during the boom. Second, pensioners have had their standard of living ripped apart. Some, I am told, can hardly feed themselves. Third, the bankers whose greed brought about our problems, have been rewarded with huge bonuses. Finally our shameless politicians are now trying to silence the voice of free speech (hence the appearance of journalists before MPs). If this country is not financially bankrupt, it iscertainly morally bankrupt.
PS Thank you, Robert for your blog on Total. It came in very useful for a lesson on inward investment and generated much discussion in my A' level Business Studies group.
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Police please .....
Quite right. The very idea of bonuses for them is obscene.
Human nature being what it is, there will no doubt be squeals of protest from those who will argue that they are now battling to recover the situation.
These should be squashed and the piggies should immediately have their snouts removed from their troughs.
I believe there should be criminal investigations to establish the level of fraud that has been perpetrated.
Some of the more outrageous ones (ie: Madoff) are now in progress, but does anyone seriously believe that the behaviour of very many senior people in the financial sector has not crossed the line? Of course not!
This is not merely a case of unwise lending - huge volumes of fraudulant financial instruments have been sold by those who were well aware that they were grossly overvalued. Indeed, carefully constructed so as to be opague to scrutiny.
This has been done deliberately with a view to triggering ridiculuous bonuses that were geared to apparent short term profits.
It has largely all been a gigantic scam.
How on earth can it have happened? Easy. People lie and behave dishonsetly if they can get away with it. And with individual bonuses of literally millions, the incentive to lie, cheat and steal proved irresistable.
Where were the regulators? What did the ratings agencies think they were doing? Why didn't the government rein it all in?
Again: greed, vanity and ambition.
These are crooks who have stolen our money. Bonuses? To hell with that. Prosecute them and confiscate their assets.
The world being what it, no doubt most of these despicable creatures will manage to wriggle away. But let us make at least a few draconian examples. That will be the only we can draw a line under this disgraceful business.
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Robert is completely correct in everything he says here. It is absolutely clear that, where financial institutions have been bailed out, the majority of the cash bonuses for the last 3 to 5 years should be repaid. They were 'earned' out of phantom profits. Why should we pay bankers millions of pounds to destroy the financial system, trash shareholders and wreck the economy?
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Should bankers be made to repay their bonuses? Yes, yes a thousand times yes sez I and not just their bonuses either. Let's strip the ****s of every last thing they own right down to their shirt studs.
But the decision alas is not mine Who's decision is it, I wonder - Gordon Brown's? Mervyn King's? The FSA's?
Perhaps none of these but someone we haven't heard of yet, a person springing forth out of the stress and the turmoil to come as the living embodiment of righteous anger and thirst for justice.
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It seems to me that the general principle of executive salary and bonus should be addressed by shareholders in the AGM.
One of the problems in recent years is the failure of shareholders to hold the directors to account.
This has happened because the directors have been able to access money by borrowing via the wholesale money market rather than by asking shareholders for capital via rights issues.
In effect the directors did not need the shareholders. Now they need to raise cash via rights issues the shareholders should exercise their power and dictate general remuneration policy.
They might do this by threatening to deselect the members of the remuneration committee from the board
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Robert, totally agree. Bonus is for exceptionally good performance. People who created mess should, at least, return their bonuses.
What also should be encouraged in business is RESPONSIBILITY and MORALITY (moral principles).
Some people turn into animals where greed and get more and more irrespective of the society is way of work. Capitalism should have a human face.
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He certainly tells it like a lot of people see it, now why is it that the same common sense approach can't also be applied to the political arena.
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Logical and fair: banker's need to repay the bonuses received for underserved performance. Liability to pay should fall on bank's executives as a back stop; if a lower-ranking banker absconds before paying back the monies due his/her superior shall be liable. Bankers who do not pay their bonuses back should not have access to ANY publicly financed benefits until they do pay the bonuses back!
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Moderators, there are only 87 posts waiting - have you all been moved over to the BBC complaints department?
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Absolutely! Why should the taxpayer be bailing out the banks when the top brass are being paid mega bucks in bonuses. Prudence is being penalised, savers sucked dry, and pensions impoverished. I dread my old age. And I'm angry that my grandchildren will be paying off the zillions that are being poured into the bottomless pockets of bankers.
Mel Menzies
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I'm sure any scrutiny of the so called contracts entered into by the banks that has led us to this meltdown would show how wreckless the bank bosses have been.
I would bet my shirt that many of these contracts are legally unenforcible, are based on highly dubious assumptions, and in some cases down right made up.
Due care and diligence is something that these bankers will have to learn but after the appropriate criminal investigations have taken place.
In the meantime, all senior staff of those banks that have been rescued by the taxpayer should have their pay cut to no more than 100,000, with no bonuses in cash or kind.
Anyone paid more should have to demonstrate that they played no role in dodgy dealings.
The board members of rescued banks should also have their assets frozen, pending the outcome of criminal investigations.
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Bit of a queue for moderation so forgive me if I make a point which my well have been made before. I tend to agree with the view that the policy makers of poor performing organisations that were custodians of our cash should not be rewarded.
For a while I worked as a lowly customer service assistant in the financial services business, where salaries are quite low and the usual annual bonus is about a month's pay. I would bet that my current equivalents at RBS, NR and HBOS etc. have never been worked so hard or had so much abuse thrown at them over the phone. They probably deserve a bonus.
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"No reward for failure."
Time to go then Mr Brown!!
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the moderators are obviously going for a backlog of a century.......come on BBC if you insist on pre modding the least you can do is pre mod!
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I do not blame the bankers they will do what they can get away with until either their share holders or regulators stop them. .In my view its the Government that bears the largest responsibility as they allowed the money supply to get out of control and stood by and watched the asset price bubble develop driven by the derivitives market.
The salaries of CEO's and CFO's in major uk companies have accelerated over the past 10 years. tThe acceleration is a direct result of companies compensation committees acquiescing to pay consultants recommendations. The compensation committees are stacked with non exec directors drawn from other blue chip companies. As the pay consultants base their recommendations on the average and the upper quartile spread of packages for directors managing similar size companies it becomes in the interest of the non exec's to ratchet up the packages presented as it is their own interest to see the the averages rise as their own salaries are set based on the average for their primary position. As a result you get a positive feedback loop with salaries getting bigger and bigger without any real justification.
The average compensation package for the top 30 CFO's in the uk was in excess of one million GBP in 2007. The top 30 included many of the CFO's of the Banks that have failed or made huge losses in 2008. These same CFO's have balance sheets with assets declared at face value for the past eighteen months despite it being clear that these so called "toxic assets" are worth only 10-20% of their face value.
The share holders have been fleeced. As a result In the US investigations and prosecutions for fraud are taking place in the UK we talk about should their knight hoods be removed and their bonuses paid back. Here’s a novel idea how about we leave their knighthoods and take their liberty away if fraud can be demonstrated plus freeze or seize their assets whilst they are investigated
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Problem is contractual bonuses. A lot of the more junior bankers (most of the people not covered by the "senior bankers" in this article) have bonuses written in, predicated on clear KPIs, which were achieved....didn't matter if they subsequently unwound.
Over the years, bonuses in the UK (not just restricted to banking) have become just another element of the pay package - no one really remembers their original use as reward for performance well beyond requirements and expectations.
I recently had dinner with senior bankers whose view was, "if these people who are complaining wanted big bonuses, they too should have worked hard and become bankers". Definitely different planet.
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I had a feeling this wasnt gonna get modded very quickly. Nearly two hours and still none.
Treading on thin ice me thinks.
There will be some dissapointed posters.
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The bonuses, as so eloquently explained by Robert on this occasion were gained under false pretences.
No doubt they will argue that no law was broken but put them in front of a jury of '12 good men (or women) and true' and lets see what the outcome is in terms of paying the bonuses back. It's a no brainer.
No doubt they will hide behind their lawyers and the recent roll back of trial by jury in financial cases 'too complicated for joe public to understand' aparently.
I wonder who whispered that self interested idea into politicians ears? The people are not clever enough to pass judgenent on complex financial cases sir...dont bother them with the burden of trying to understand that which only the financial masters of the universe can comprehend sir.... better leave that to a bunch of highly specialised highly paid lawyers and consultants sir.....
Nice little protection raquet that.
There is an unwritten moral law which we should all abide by. it is unwritten because it is constantly changing as the world constantly changes which is why a jury system of justice is the best to continually moderate it no matter what the subject matter.
Funny how everything that is written in this blog emerges as political announcements some time later.
Here is an idea.
All we need is somebody to put a case to the director of public prosecutions, it may not even be a good case based on the written law but if it gets past that stage and is in front of a jury and a presedence is set, that is all we will need. Noboddy will dare challenge it then and the cycle of protectionism within the financial and legal elite will be broken.
Alternatively they could just voluntarily give the money back of course such that we can all feel like a little faith in human nature has been restored.
We have formed a lobby group outside of this arena to focus our efforts and hopefully assist in some way in getting a more focused message accross.
Vegetable - grower and Ed iglehart regularly post links to the lobby group forum for those who want to track it down and contribute.
If even one city high flyer publicly decides to give even half of his or her ill gotten bonuses back off the back of these writtings and the lobbyists activities it will be worth it.
Time to crank up the pressure.
Jericoa
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will we get 100 unmoderated?
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Yes
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The bonuses are what encouraged these idiots to take the risks they did. But whereas a gambler is gambling with their own money, these idiots were gambling with our money. It's like 'Who wants to be a millionaire' I answer questions much better than most of the contestants because I make good guesses and getting it wrong does not cost me anything and my family thinks how clever I am. If I was in the seat with £125000 there are lots of times I would not have gone with my good guess. The bankers are like me sitting at home. They work in a setup where there is little personal risk.
If the bonus culture is what motivates them, let's carry on with it and be logical. If you win you get a bonus. If you lose you get a fine and could lose everything you have ever won. Horrors! You could end up living on an estate (not the gated type) with your children going to state schools with dealers at the gates and drive a beat up old Mini Metro. Bonuses and losses are paid in stages over 5 years. If you lose too much you lose your job as well and are banned from working in the financial sector. What sort of risk would they make then?
Vindictive? Me? You bet!!
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And the past capital gains and income tax - in the form of hard cash - which was paid out on the basis of this nebulous capital gain should also be paid back?
Unlikely!
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This topic creates more anger in the general populace than any I know!
Bankers have behaved like unruly kids left alone in the sweetshop and they should be forced to put it all back... right now!
Freddie Forsyth speaks for me - see him speak my mind here:
http://news.bbc.co.uk/1/hi/programmes/the_daily_politics/7869473.stm
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The suggestion that bonuses are in any way justifiable, let alone that they come from the tax subsidies paid by broke and impoverished taxpayers to fund the already well-lined pockets of the wealthy few, is obscene; the arrogance of the whole bonus system is breathtaking and none of this cannot possibly be justified.
If an average employee was turning in performances as pathetic as the one's we've seen from the banking fraternity they'd be fired not rewarded for them. It is banking greed that drove capitalism into the buffers, their insatiable demands for more returns for their investors that have taken so many to the wall.
Bankers have been wreaking a financial holocaust on society for years and they want premiums to go into their backpocket for this? This is one big 21st century swindle deserving of nothing less than a tsunami of social disgust.
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Well Mr Peston I agree with the tone of your blog. Many thanks to you for many months of following your blog.
But the losses attributed to CDOs CDSs synthetic CDOs etc etc are not ALL properly or easily quantifiable. Such losses' calculations may also turn out to be illusory, if only in part....depends on how the future pans out.
Mark-to-Model and Mark-to-Market are rather crude accountancy tools which may well distort the underlying ECONOMIC reality.
It is not inconceivable that these assets turn out to have a higher long-term value than currently 'thought' .
In some ways the 'losses' are as unreal as the gains previously. They just seem much more painful than anything else we have experienced. OUCH OUCH OUCH.
I beginning to think that a lot of what is apparently going in the world's financial markets is Traum and not Wirklichkeit.
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2 hours and no moderation?????????
Public Sector 'workers' eh ;-)
Should the pay pay back their bonus? Surely thats not a serious question that needs answering!!!
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time Brown stopped penalising the little bloke in England and started to get the bankers to play ball. Maybe not only cap bankers salaries at say the average UK salary ...eg £21,000... yes thats right 5% of your bonus's but hey lets get our money back for what are clearly inappropriate bonus payments.
If Brown and parliament isn't up to the job then maybe we need stronger leadership... from the people for the people and by the people.
Makes you wonder if the MP's who were supposedly guarding our interests also need to come clean and return their salaries, massive perks and benefits to the national kitty-the Bank of England.
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ummm just another thought... in times of massive finacial concerns to Mr and Mrs Jo Bloggs (shucks is that politicaly incorrect???) maybe we can save a few multi-million bob by the BBC using its money more wisely eg stop taking it from the poor ..... maybe JonathanRoss and co's salaries need a careful review by the people... lets have the chance to vote on whether we think the BBC pays much to much for some of its ... errrr..... entertainment...??? Why should so called entertainers be paid 25 times the average salary? have I missed soemthing??
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Yes they should be paid. But not to the bankers. They should be paid to those who are losing income due to the bankers' inexcusable negligence.
I, for one, am (so far) losing £2500 p.a. on savings interest. This represents 12.5% of what WAS my total annual income. This figure is scheduled to get worse once the fixed rates on my savings come to the end of their life as the year progresses. I feel impoverished and aggrieved, not least as there is little sign of this parlous situation being reversed in my lifetime.
Meanwhile Brown merely fishes for re-election and, guessing no doubt that people with savings are more likely to vote other than labour, sees no reason to stop this rot.
KN
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Robert,
You're absolutely right. It is absurd. In every case where the government has intervened to save a bank, you have an existential proof that no bonus should be awarded. Bonuses should come only when a firm has made profits. A bank whose existence has been maintained only through state aid cannot have made true profits.
There is a separate argument that those in profitable *divisions* of a bank that has made losses overall should be rewarded. This would make sense only if there were concomitant reductions (negative bonuses) in the loss-making divisions.
One can view any firm as, in essence, a group of people who agree to work together and take out collective income insurance such that if some people do very well and others do less well in a given year, pay is evened out nonetheless. If one person has a lean year, they can still get by, and the firm keeps them on because they will probably be of greater value in other years. (If the firm did not think this were the case, the person ought to be fired.) Bonuses to some extent move away from this model, but you cannot move away from it entirely. If a firm had made overall losses, it should not be able to pay bonuses unless it had reserves or guaranteed future cash flow. In this situation, the cash is coming from the taxpayer. In effect, taxes are being privatized by the very firms who are responsible for the disaster we are facing.
To repeat: no state-assisted bank should be paying ANY bonuses. None. Nada. Zip. Banks lost the right to pay bonuses and try to "retain the best staff" when they effectively went bust. Allowing them to pay bonuses with state aid is indirect theft, a wealth transfer from the responsible to the irresponsible. Labour need to be told that if they allow this, people will not vote for them at the next election.
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this must be a record in non moderation, over 110 posts and three hours without a sign of life!....ah now i understand, carol thatcher was the moderator!
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Blimey Robert, this blog will keep the moderator up all night.
Simple solution:
If one penny of bonus is paid to any undeserving bank executive, simply remove your money and deposit it with another who will receive it with open arms.
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Bonuses should only be 'reward' incentives for exceptional contributions above and beyond what employees are contracturally expected to make or action that has greatly enhanced the reputation of the profession.
They are not automatic perks due to everyone simply because they 'turned up' for work. Where bonuses are paid for proven failure, they should be forfeit and I'd go further and make them retrospectively returnable (with interest) where it is clear they were wrongly paid and persons criminally responsible where they were received as a result of culpable negligence and dishonesty.
The 'fat-cat' culture of the Financial sector is endemic at all levels of the business, as is selfish arrogance and greed. Hence it is not surprising that they are incapable of accepting they have anything to be sorry about. They're a reprehensible class.
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Robert Preston:
I think that bankers should repay their bonuses...
~Dennis Junior~
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Finally, we here some good common sense!!
Well Done Robert! You have hit the nail on the head with this one.
PAY BACK THE BONUSES!!!
Justice at last!!!
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Not only the bonuses but the back salaries of all the top bankers who did nothing to avert this crisis should be reclaimed. These people deserve to lose all their wealth.
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Having previously worked for an investment bank for some 13 years I can tell you there is no one who deserves a bonus.
Base salaries are quite frankly way too genertous and the principal of getting a bonus is solely to further line pockets before there was the annual merry go round.
The very notion that there is a global hunt for talent is a myth and we only have to look at what that talent generated to realise it is a joke.
Senior management is equally does not earn its money and has little to no understanding of what is actually going on.
Just because the day is long does not mean the pay should be as high as it is. I speak from experience rest assured and the rates of pay could be cut by 70% and still there would be a line for them.
Its dirt easy to trade when its not your money and only take a share of the winnings but never lose when you are down.
A new basis is needed togther with a major clear out of self inflated egos who when push come to shove have no more idea of what is going on than my bug toe.
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Robert:
I think that bankers should have the common courtesy to repay the previous year bonuses...If your bank received any form of financial aid from government....
~Dennis Junior~
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There is tale about the wee rich man who called out the local plumber to fix his expensive heating system. After just 10 minutes got the heating going again and , then the plumber gave the wee rich man his invoice of £1000! Shocked he wee tich man asked: "Phew, £1000 for ten minutes work. How do you justify that, young man?" The plumber cooly replied, "Nine minutes for my time, one minute for my expertise...", "Wait, wait a minute dear boy...one minute for your expertise..this is ridiculous. Please explain?". The plumber calmly did, " Hitting the pipe with my hammer in the exact spot where it mattered!".
The banks have been hitting us hard for their "expertise" in some shape or form without serious challenges by us, the customer for years. Now, it is all becoming a bit of a travesty through the greed and the dishonesty of its CEO's. And the irony is that we, as tax payers, are now expected to support them while they still claim excessive pay awards. This is DIS-ease of distrust is beyond redemption. These men and women in the privledged position are bagging still what they can and it is shameful. Yet, we are powerless, truly and utterly helpless to do anything about unless our government intervenes and acts upon such self-centred acts. The banks know exactly when, where and how to hit the right spot when it comes to their "expertise" because they have that inside scoop to do such things. The sad thing is that we already know that their credibility is at an all time low and it will take years to rebuild but do they care now? In my view, the RBS ought to be honest with itself and become Nationalised. And other banks who fail, ought to be allowed to dry up and wind up in the same way they treat some of their homeowners affected by their mess.
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Robert,
You posted your blog at 16.12 GMT. The first respondent answered at 016.30 GMT.
As I write, anothermicawber’s contribution has not yet been acknowledged [19.13 GMT ish].
Do the Mods know you’ve publicly expressed an opinion? Do they know that over 100 respondents have also?
I have no comment on topic because I feel that the small beer of bonuses as they now stand will have infinitesimal effect on how we pay our utility bills to energy et al suppliers that may have to continue supply under multi-government guarantee let alone the other interconnected micro and macro contributors to our global economy.
I hope that this financial and economic shock to the world will promote a certain politeness to its citizens, human and otherwise, and to the collective environment.
N.
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Hi Robert
This is my first comment on your blog having been an avid reader of your material for some time. Should bankers repay bonuses? I don't think so. The bonuses were presumably paid after the recipients had met certain pre-defined performance criteria. We now know, with the benefit of hindsight, that the criteria were dangerously inappropriate. The banking institutions need to learn from this experience to ensure a fiasco of this type can never be repeated.
I am sure there are many other industries where performance-related payments have subsequently been deemed unwarranted, particularly when based on short term results. However, I doubt there have ever been retrospective claw-backs.
I am personally not in favour of any bonuses unless it can be demonstrated without any shadow of doubt that the individual performance has been exceptional and ALL stakeholders will benefit in the immediate or longer term, which in practice is very difficult to achieve!
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Robert... very short, clear and simple blog from you today, thanks.
And very, short, clear comment for one ordinary man in the street....
Absolutely completely agree with you.
Is Gordon Brown going to be spineless on this one, or is he going to be brave?
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2.5 hours moderation - is this a record.
Whilst there in natural antipathy against bankers being given bonuses in the future, it will be impossible to prevent bonuses being paid when the contract of employment between the bank and the employee expressley allows for said bonuses and any requirements have been met.
If the banks have been so silly as to allow bonuses even if substantial losses have accrued then more fool they.
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Robert
Can you explain to a layman how Northern Rock are supposed to have paid back the taxpayers, huge amounts of the money they borrowed generating their recent bonus awards?
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A lot of words from Turner after the event. Not interested. Not impressed with long words and presenting the problem as difficult. It is not. It was blindingly obvious that it was going on. Get somebody in who can act instead of talk, and act before the event infolds. Furthermore the issue of bonuses is a red herring. It is a matter for the managment and the share holders of a private company. If sufficent shares end up in the hands of HMG then it can act as any other shareholder can. Raising the issue of bonuses it is just giving an opportunity to cloud the water. The focus should be on effective regulation and effective and representative auditing. And slinging people in jail who have comitted fraud. As for the other issue that always pops up - you have to pay to get the best. If this is the best then a monkey can do the job.
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Certainly not on the same planet as the little guys who've had to struggle through the snow today to fix their City infrastructure.
Thanks for mending my computer, oh and I've screwed your pension, is that ok?
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It is only going to take one court to rule that the business model operated by a particular bank was so recklessly negligent as to constitute fraud, and we will be in a wholly different territory.
There is no legal problem with tracing into, and recovering, the proceeds of fraud after the event. Most Western countries have this sort of legislation and use it whenever they can.
If the finding that the bank was acting fraudulently is accompanied by a ruling that the executives (and probably even the midtier bankers who were collectively trousering obscene amounts) were aware that the bank was acting recklessly, then they will have no "bona fides" defence to a tracing claim. So they give the cash back.
Wait until the legal disclosure starts coming through, and it becomes clear what the boards of directors (and their subordinates) knew, and cared about, and what they disregarded and didn't care about. It will be just like the tobacco industry, pretending that it didn't know that what it was selling was toxic. Expect identical tactics: delaying disclosure, spurious defences, hiding evidence, intimidation, lobbying, lobbying, lobbying.
All the bankers will be busily trying to use up the cash or salt it away somewhere else to "beat" a tracing clawback. Exhibit number one: the fragrant Dick Fuld transferring his 35 million dollar house to his wife for ten bucks. I wonder whether, in the fullness of time, the other inmates of San Quentin will be as scared of the "Wall Street Gorilla" as his silly pinstriped subordinates were?
It comes down to a simple social policy choice. Is it a greater social evil to take the money off the banking industry that they have received and want to keep? Or is it a greater social evil not to claw that money back and to fail to allow the victims of the banks' actions to be compensated, even if only very partially or only indirectly? This is a question that our societies have to make.
And what about moral hazard? If the bank robber gets told off but gets to keep the cash, is that justice? If the only downside for the bankers is that the trough is disappearing and they can't gobble any more, then how does that disincentivise the next lot of bankers/"green" energy snakeoil salesmen/whatever from creating another toxic trough?
You can probably tell my view from the tone of my comments!
If a rogue state had achieved this much damage to the Western financial system through an orchestrated process of industrial espionage, then even Nice Mr Barak would be hard-pressed not to reduce it to a glowing pool of glass.
I find it odd that a collection of individuals - we know who they are, we know where they live - can get away with achieving the same thing and that there should be much need for debate about whether they give any money back.
The legal process will take too long and every day that passes makes it, in practice, harder to claw the money back. Legislation will be needed.
Needless to say, it would be a hugely popularist votewinner. So I'd bet that GB has people looking at the legality of legislation to claw the bonuses back. Cameron... I'm still not so sure... just who do the Tories back in a pinch... time will tell. Why haven't the Tories been pressing for this sort of action?
All hugely depressing.
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It is rather ironic that Robert Peston, Jeff Randall and others were quizzed by MPs this week regarding their level of influence over the economy. In August 2008 the Chancellor, Alistair Darling, managed to cause a major run on the Pound in a public fit of pique with the PM. A few days later the Governor of the Bank of England caused even greater damage with ill-judged public comments. He repeated the offence a couple of months later and caused further damage to the economy. Shouldn't these 2 characters be in the dock for undermining british business while stroking their own egos?
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Yes - a condition of the bailout should be that mega bonuses are repaid.
The actions of the bankers and traders bears little difference to those of an embezzler, fraudster or money launderer, yet once found guilty of the offence the assets of these criminals are seized.
The bankers are having the last laugh at the publics expense and rubbing our noses in it as they continue to lord it up with further bonuses and entertaining clients on all expense paid ski trips whilst businesses and industries go to the ground along with our jobs then homes.
Industry fatcats have used bonus schemes for long enough in order to rip off staff at base/branch level from earning a decent, in line with cost of living salary whilst smugly awarding themselves humongous ones. Bonuses enable bosses to keep salaries low so staff are compelled to sell extra products, whether suitable for the customer or not, in order to receive half decent pay. When staff are forced to compete against each other in this way in order to hit targets just to receive performance related pay incentives, conscientiousness flys out of the window with good customer aftersales service being virtually non existant when problems arise.
Bonus schemes serve only the hierarchy well - whatever happened to simply getting paid to do a job overseen by fair, effective managers skilled in weedling out skivvers and incompetents.
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Hey - is our moderator dead or dead drunk?
129 messages, all awaiting moderation....
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Far from being paid any bonus for turning up to work at a bank. Those who have been rewarded for such exceptional performance should have their bonuses revalued in the light of the now revelaed truth behind their activities.
Perhaps the sums they should rightly then be required to repay will go some way to recompensing those of us who have lost significant sums, jobs etc.
Good on Obama although I don't know why he set the level so high. As for Gordon Brown and his rather weak follow up perhaps all salaries at "helped" banks should be set at a maximum below those of an MP.
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131 posts and all awaiting moderation.
Seems they have gone on strike.
What no performance bonus?
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There should be no bonuses for employees of majority state-owned companies. And they should be on the civil service pay scale. Without the index-linked pension. It is common sense and the call is getting louder by the day.
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Robert's assertion that bonuses should reward exceptional performance is right - but only exceptional performance which ought to be a rare event.
The bonus culture has permeated the management layers in banks and it is hard to see how this regime is going to be reversed.
Are we not really talking about sub-standard management and, therefore, a need to see more senior managers relieved of their posts?
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The French had a great machine, perfectly engineered for times like this.
They called it the national razor.
I wonder if we could borrow it.
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This is the most sensible thing thats been said since the problem started.
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Most of these banks and building societies are showing losses worth billions of pounds.
If that is so then they are entitled to offset these losses against tax paid for the last three years presumably billions of pounds.
I would like to know what is happening to this money and how much it will cost the treasury.
Where in the equation is this being offset by the extra money the taxpayer is providing.
No answers so far on this one.
Perhaps we are still waiting for the audited accounts.
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"But it's about the idea that a bonus should be a reward for exceptional performance." The banks are still in business are they not? Now that's what I call exceptional performance!
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Paying back the bonuses is merely a drop in an ocean, would it actually make a blind bit of difference, it would probably make most tabloid readers happy, but what purpose would it serve. I doubt that all the people that "trousered" these bonuses are actually sitting with piles of used tenners in their basements, or indeed pots of mythical gold. These people would have been invested in stocks, shares, bonds etc, which by now are almost worthless, if you dont believe me, directors shareholdings are public, try digging about on Yahoo or some of the annual reports.
Thus the bankrupting of a few individuals would serve little or no purpose, other than to pile on more misery to an already beleagured industry, by pursuing a witch hunt against a few individuals would serve little or no purpose other than make a few people gloat over how the mighty have fallen, this will not help recovery, merely prolong the misery and keep the top talent away from the city and we will be left with the chaff that are willing to be governed by the public will, which to say the least, is fickle at best.
Mass hysteria over the banks, now the councils having no grit, what next, lets start a witch-hunt over who is to blame for global warming, that should be fun!
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Is it not time for governments around the world took stern action against those greedy bankers.If they decide to leave,where are they going to get jobs?Governments are elected to govern and make correct decisions.There is no sign of that when it comes to dealing with those vultures.
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Please dont forget that the vast majority of people that work in the banking industry are not recipients of fat cat bonuses. This majority are the people that spend hours commuting in packed trains, work long hours and are rarely paid overtime .These people work in technology and back office departments etc , enabling traders and corporate bankers as they go about their business.They may or may not recieve a performance related bonus at the end of the year that is rarely over 10 to 20% of their pay. Bonuses are an essential tool for the banks to encourage and enhance performance and should not be used as a political tool to deflect failings in the proper regulation of banking activities by the government and its regulaters
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What the banks (and others in our financial world) have done is fraudulently pay themselves patently unjustified bonuses, to such an extent that the banking system has become bankrupt.
It is hard to see how these people can avoid being "requested" to make refunds to the Treasury, and it is particularly galling to see people who have saved for years watching their pensions collapse around them whilst those who caused the problem and those living off credit continue to benefit from the present crisis.
I also note that Gordon Brown has refrained from seriously attempting to reign in the salaries and bonuses of Bankers.. apparently asking them to consider how large payments would look in the current situation. They know how they look, and they like it. You can never accuse Gordon of taking one clear path when two will do!
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It is like a miracle. Suddenly brains have been switched back on. For so many years those who never switched theirs off were ridiculed. Now even naivest believers of the neoliberal propaganda understand they were totally wrong. One of the things that we were constantly told was that the "skills" of top managers were priceless and any financial reward would actually be far too low. We were told these geniuses were so rare, any price was justified so they wouldn't run off and benefit someone else. This ideology was so rife, the words still keep ringing in my ears. Suddenly all the mouths that let this nonsense out are shut. Some people now even want the money back...
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#48 to 141 not yet moderated - obviously a lot of strong feeling out there.
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For some one who normally writes long the answer to this question is short
Yes
Reason, they don’t understand why they should pay them back.
Until they do understand they should never receive another or retire permanently
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Whay are thes scumbag criminals (sorry bankers) not in prison?
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In many ways our solution to this issue is surely crucial to what we eventually shape out of this current meltdown.
In a world where so much of the wealth is with so few people, and many of them have got super rich whilst managing the banks that got us into this mess, how should we decide to proceed?
These are exceptional circumstances, and as anothermrmicawber says, we will all pay for years for their excesses and huge errors of judgment. Let us not compound that by letting them keep the huge undeserved personal gains.
At the same time, people across the world are losing their jobs and homes as direct consequences of these errors.
By whatever measure, and however generously the decisions are viewed, massive mis-judgments were made at the very least. Surely some level of duty of care exists in such powerful and responsible positions, and if not, what message do we send to the rest of society.
For most people I think the solution is very simple - take the bonuses of the last 5 years back to a huge extent, and let the recipients be grateful that further legal action is not pursued. Anyone remember Enron, and what came to light when the digging started?
Maybe part of the problem is that so many governments in the world also failed so conspicuously to provide any effective regulation at all, and perhaps our government would rather not take the moral high ground after all. President Obama appears to not be hampered by such thoughts or fears at least. Thanks to the blogs, and the media / public link in general, we will hopefully force some sort of justice after all.
If we can, perhaps the New Capitalism that emerges will indeed be fairer than the current broken version with its fundamental flaws and exploitations.
More power to you Robert, and hope our politicians are also reading and learning!
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Robert its about time you said this. It has been a weakness in your reporting that you have not pointed this out until in such plain speech, until now. You have had your reasons, your own conflicts of interests. Obama thankfully has had the balls to make the call and now every journo and politician feels brave enough to say something.
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Lets STOP PUSSY FOOTING!!
PROCEEDS OF CRIME LEGISLATION:
TAKE THE HOUSES ,THE INVESTMENTS ,THE
CASH ,THE WORKS OF ART ,THE CARS ETC.
ASSET RECOVERY & GET ON WITH IT!!
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Post 60
Sorry peterj42 but you make a point which many struggle with and my reply is in general terms to all those who fall into your position.
Any company is only able to operate because of the people in it and if you refused to work for a greedy self centred banking company it would not have lost billions in a rip of economy scam creating a false world wide economic bubble and resulting in taking all the billions from your fellow countrymen
Likewise a government only operates by the will of the people if we don’t elect the politicians they can not do things wrong if government does the wrong things we should remove it.
Same as civil servants they operate by permission of the government if they are not doing the right things by the people who elected the government they should be thrown out. Not moved on
But the fact is peterj42 you like any one else in a free society had the choice of who you worked for and who you threw your lot in with. If you weren’t supportive of the greedy and manipulative beggar my neighbour approach you could have gone and worked for a manufacturer and created real genuine wealth instead of helping generating a false economy of millions of problems to off load on all your fellow citizens we are not exempt because we did not vote or did what the boss said we had the choice even if we only made the tea.
The extremists only prosper through permission of the do not disturb silent majority.
We will all need to watch out Mr Brown if they do ever take down the do not disturb sign, as one or two are beginning to now.
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#60 pETER J42
So I'm an employee in a Financial Services company.
I'm set a target.
I don't set the rules.
I'm offered a bonus for meeting that target.
This is part of my contract of employment.
I exceed that target.
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Now let's take it a few lines further.....
The company who set the target have gone bankrupt; there is no money left, so despite me exceeding my target and my contract of employment, there is no company left, there's no money left, all is gone, and just as I am left high and dry on the unemployment heap.....
.....someone comes along, a kind and generous benefactor who has decided to resurrect the fortunes of my bankrupt company, someone who will ignore the fact that my company was mismanaged and run into the ground.....
.....and now everything is as it was. Fantastic! Now e have money again. Not because we were masterful, no purely because we were bailed out.
Get a life! Start living in the real world!
All employees of Financial Services companies deserve a bonus no more than the taxpayer does for giving you money just to stay in a job!
And this is why the government should take the bonuses off you because morally and in many cases legally, you don't stand a chance in hell of justifying any extra payments, contracts or no contracts.
And this from a self-employed Financial Services worker!
Oh and by the way. I'll wait until the end of my financial year to see if my performance in the previous twelve months warrants a pay rise which will come out of my own pocket. It really focuses the mind when you are responsible and accountable for your own actions.
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This comment was removed because the moderators found it broke the House Rules.
Expecting the senior bankers themself to come crawling back and handover their previous bonuses is a bit far fetched. I think it's fair to say that not a single bank executive has stood up and said "I've failed badly on this one". No, it was brough upon them from abroad, and as everybody else did the same thing, and nobody else had admitted failure, what would be the point of a single individual doing it. Accountability ?? No, not in this country mate.
Well fortunately we have a choice. We have the choice of turning our backs to the banks where we havent seen their senior staff admitting to their mistakes and to some extent misconduct of their mandate. Punish their behaviour, sell shares in their banks, deposit our money in banks that has behaved responsibly of which in fact there are many where their corporate set of values are so much more what we as individuals will expect. If we continue to support the big banks like headless chickens, we indirectly support unprecedented greed, lack of accountability and immoral business behaviour. We do have a choice.
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Why dont we pay policemen 3 million a year just for doing their job?
Why dont we pay teachers 3 million a year just for doing their job?
Yet banking staff have been paying themselves a lottery jackpot a year for several years.
The difference?
Policemen and teachers etc have no access to other peoples money, bankers do.
Suspicious.
The public have worked this out, and are not happy.
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Lets get some facts straight:-
- the majority of branch and telephone and processing centre staff get paid the same as shop assistants. They do not get big bonuses, and if they do get a performance bonus (and no they are not all sales related) they'd be lucky to get £600 gross
- your average head office job earns £20k. Most have not had a salary increase for a few years and even fewer get a bonus.
- Banks do not pay overtime - a high percentage of people on low salaries work unpaid overtime everyday
- Only BANKERS as in those in the Global Money Markets earn big bucks and get paid bonuses.
- I bet you that when the annual results (losses even) are announced, you will find that Retail / Consumer Banking is still a good solid business and that it is the Global Markets / Corporate side that shows the loss.
My point is, can some of you stop harping on about all bankers earning big bonuses and salaries. The majority don't and most have lost their savings to boot as they also invested their savings in their own company shares.
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Great blog Mr Peston. And Hallelulah to post # 1 anothermrmicawber!
Please count me in to the revolution. "British money for British workers! Let's get our bonuses back!"
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#64 PeterJ42
"To ensure they only pay them when they have earned the company the money to pay them from".
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Blimey Peter, I have just answered #60 and up you pop again!
In normal circumstances I would agree with your statement but as I have said before, if the company is bust, and most of the banks were before being bailed out,
1) strictly speaking, there is no money from which to pay the bonus
and
2) if your company is bust, they have not 'earned the company the money to pay them from' because there is no money left!
I am as capitalist as the next person but a fair one, a responsible one and one who expects accountability. Now I know it is hard for your ardent socialists to take this on board but it is possible and if more had behaved in a less unseemly behaviour, you would have had your bonus and we wouldn't have a crisis; you and your sort have ruined it for everyone.
Now, promise me you haven't written further pieces of rubbish below as i will never get to bed at this rate.
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#1 anothemrmcawber
Better written than RP's contribution that.
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There are two questions here.
- Should we put a stop to this bonus nonsense going forward.
- Is there any way to retrospectively recover bonuses paid in the past.
The answer to the former must be yes. Indeed I think a blanket ban (or an extremely high tax) on excessively high cash bonuses might be a good idea. I've suffered from the effects of executive bonus culture for years - ie senior management being paid large bonuses based on badly thought out criteria. It has invariably led to management following policies which they know are not in the long term interests of the company (but will give them their short-term bonuses which frankly are big enough for them to retire on). And I don't even work in the financial sector, where things seem to be an order of manitude worse. While we are at it we should ban other contractual nonsense like golden handshakes too.
The latter (retrospective action) is more difficult. But the scale of the money involved, and the cost to society of fixing the mess left behind, are such that something has to be done. Retrospective taxes? Legal action? A wealth tax on the ultra-rich (which would catch the culprits - but would catch others too). Take your pick.....
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As a Director of an SME manufacturing company I have to say that I agree with every word that Robert Peston writes in this blog. How dare these people pocket such mind-blowing salaries and bonuses whilst depriving the greater economy of the fluidity of working capital. I am lucky, in that my engineering company has a strong enough balance sheet to weather this storm, many of my business friends will not and I place the blame for their plight firmly at the door of the greedy bankers that President Obama has had the political guts to rein in. We need such strength from our so-called leaders
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I suppose it all boils down to what your perception of a bonus is really.
If you work for a company and your contract says yo get a 10% bonus if you meet your targets, one can safely assume they mean 10% of your annual salary, so for someome earning £100000 pa, they would get their bonus of £10000.
For your jo average that would probably be the perception of a bonus, any working man would be happy, nay grateful for such a perk.
Now who invented multiples of annual salary as bonus payments?
Only those whos avarice knows no bounds, who have absolutly no sense of fair play, those without morals or standards, whos greed is beyond normal comprehension : I believe someone once used a quote of 'Thieves, liars, fornicators, speculators and bastards to tee' -some reference to carpet baggers missing.
These people, if that term describes them, deserve the full wrath of our society. Saying sorry and being allowed to keep the booty is just NOT good enough.
Will anything be done in this fair and pleasant land..... I doubt it so much. What we need to answer, is the question why?
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And the sickest thought of all is the possibility that some bank executives paid out colossal bonus rounds AFTER THEY KNEW THAT ALL THEIR DEPOSITORS MONEY MAY BE IN SERIOUS JEOPARDY.
That is truly awful, and needs urgent investigation.
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Of course bankers should repay their unjustified bonuses, given that they are purportedly 'performance related' and that the performance of virtually the entire banking sector has, IN REAL TERMS, been abysmal for years. Clearly, the bonuses they have been awarding themselves year on year have been based on falsified information and there need to be public redress for such blatant disregard for duty of care.
I would add also, that their entire remuneration packages should be subjected to much closer scrutiny and control. To that end, perhaps retrospective packages should be the norm rather than writing themselves blank cheques in advance. We are constantly being told, "if we want the best we must pay for the best". Well, if they are that good, let show they have the guts to demonstrate their acumen and then they can be retrospectively rewarded accordingly. One thing is definite, we have been paying for the 'best' for years and clearly we have been saddled with executive dross, and we are still encumbered with the same executive dross.
Indeed, the manner in which banking performances have been accounted for and reported has been tantamount to unadulterated fraud. The entirely selfish and ego-centric behaviour of senior bankers for, possibly, the past 30 years has been bordering on criminal practice but, sadly, not a single one of them is to be held to account for their avarice, greed and downright dishonesty.
We are all now fully aware of the results of the unmitigated dishonesty which these individuals have perpetrated for years. Mounting unemployment, substantial reduction in investment incomes for millions, especially for those in retirement, almost unimaginable misery for millions of families and individuals who were previously solvent and comfortable, the virtual collapse of a once internationally envied banking system. These banking executives have totally abused the privileges of their positions by taking advantage of the ordinary, vulnerable people, investors and employees alike.
And using the USA sub-prime market collapse as an excuse just does not wash. They have all been eager and willing participants, simply to pad out their own pockets.
In short, they are leech-like charlatans who have breached the faith entrusted in them by millions of people. Unfortunately though, the 'show' is still controlled by the same 'cosy club' of charlatans who continue to write and act out their own sets of rules.
As for the FSA, who in that 'organisation' (sic) is to be held to account for its gross incompetence.? As for Adair Turner, I have little faith in him and his rhetoric. He is just another poacher turned gamekeeper and although he may be strong on words just now, I doubt he will have the courage of being prepared to bite the hand that feeds him?
The entire system has been corrupted and, even if they don't start out that way, the people who rise to those exalted positions are always eventually sucked into the corruption, if only to conserve their own skins. I does not do to not play by the rules of the cosy club.
The only way a potential for a repeat of these circumstances can be minimised is by the introduction of stringent legislative control. That must be supported by sever retribution for serious misdemeanours such as have become the accepted norm for far too long.
The likelihood of that coming about though is about as certain as a 'second coming', especially when politicians of all colours look towards the same 'system' to provide them with insurance policies for their futures when they are no longer in office. Indeed whilst they are in office in the 'Lords'!
What a despicable lot they are.
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#101 Boilerbill
"The bonuses are what encouraged these idiots to take the risks they did. But whereas a gambler is gambling with their own money, these idiots were gambling with our money. It's like 'Who wants to be a millionaire' I answer questions much better than most of the contestants because I make good guesses and getting it wrong does not cost me anything and my family thinks how clever I am. If I was in the seat with ?125000 there are lots of times I would not have gone with my good guess. The bankers are like me sitting at home. They work in a setup where there is little personal risk".
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Boilerbill, you might just as well have been writing about our government; it ain't their money either but hey ho let's have a little flutter: you win and you get to live at No 10 for another five years, you lose and you get to win £12,000,000 like our very own Teflon Tony. If I was Gordon, I'd take a hit now and go off into the sunset with the loot!
If it's a no brainer for our politicians, why should the bankers care?
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More proto fascist populist garbage from the BBC - and you are supposed to provide an independent and objective analysis.
There can be no possible argument for bankers, or anyone else, being compelled to repay money that they have taken title to through lawful means.
If any crime has been committed then people should be investigated and prosecuted. If found guilty then punishment should be according to the law as it stands. if the law provides for the confiscation of assets then fine, if not then that is also fine.
It is certainly appropriate that, going forward, no further bonus payments should be made.
Senior figures with a public profile should consider voluntarily returning a portion of their wealth for the greater good of society.
It would be surprising if they were to seriously consider such an action. No doubt they in turn may also be surprised at the developing visceral seething hatred that is developing amongst the general population.
Multi millionaire bankers cocking a snoop at the masses may well appear an inviting target - but there is no choice (except in cases of crime) other than to let them go. Pass any laws against them and very soon the same laws will be used against you.
Pandering to populist outrage (no matter how justified that outrage) is a fast way to totalitariasm - something one would expect the BBC to be fully aware of.
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No, they shouldn't repay them.
After their conviction, their worldwide assets should be seized as a proceed of crime. It should'nt be optional.
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The majoraty of polititions (especially labour)when asked about reprimanding bankers say things like "we need to move on from this" or "no actual laws have been broken"
It is becoming quite obvious that there are a whole lot of mp's, lords, bankers, lawyers, accountants that dont want the trail of these bonuses exposed. IT STINKS!
Next time i have the taxman hounding my arse i think ill try that line and i wonder where that will get me. I lost some receipts in a house move one year when i was a self employed bricklayer. I broke no laws but it didnt stop the inland revenue fining me £12,000.
I am at the stage now where i feel no loyalty to this country. I no longer have any passion for being english or british. Its just the bit of rock i was born on. But then thats what nulabour seemed to have wanted all along. How sad.
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I don't have a problem with bonuses per se as long as they are earned when exceptional profits are turned into unencumbered CASH.
Unrealised capital gains, increases in a company's share price, or any other such measure which is open to manipulation, non-realisation or fluctuation, should never be used for paying out bonuses.
It's easy to manipulate profit, not so easy to fiddle what is actually in the bank.
Cash in the balance sheet can be paid to shareholders. Fictitious gains in the profit and loss account cannot.
If shareholders agree that a percentage of exceptional cash generation can be paid to employees as a reward and incentive to produce more of the same, it sounds good to me.
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I refer to my previous contribution tonight, which has just surfaced.
An apparently clever contributor whose online name may begin with ‘J’ seemed to have slated blog contributors for not bothering to read previous posts before commenting. Now that clever contributor knows why.
Does a double-first in Classics and a possible following career in trading [oil, commodities, currencies and all the myriad derivatives that exist on the ‘underlying’] entitle even polymaths to rule the huge and incomprehensible world that the best computer models can only approximate?
c 22.00 050209
N.
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In my view these people have been guilty of sabotage, no less than the man who damages our economy through blowing up a railway line or destroying a factory machine.
The damage they have done must be on a par with that wreaked by the Luftwaffe and my belief is that these bankers and others who have actually caused this situation should not only lose their bonuses but also be put on trial for their life.
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GOLLY GOSH TALLY HO!!
PASS THE MARMALADE MY LADY.
ONLY ROBERTSONS WILL DO!
TIME MR TURNER WENT TO?
WHAT ABOUT THE B OF E HAVING A CULL
ASWELL?
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I think it is a brilliant idea to pursue some of the money that has been paid out to bankers in bonuses. 31 GBP billion??? (see posting at the start of this list)
A drop in the ocean compared to how much we have now bailed out the banks by, but is there a political party out there prepared to pick up this idea ?
Now everyone is projecting massive cuts in public spending - which is ironic considering the creaking state of the British infrastructure - surely such an action would be legally and morally justifiable in order to at least shore up the fabric of the society we live in?
Really, the stupidity of banks is clearly staggering that they can even consider paying bonsues given the recent events.
Those banks that have turned to the state for help deserve every piece of restrictive legislation that is hopefully coming their way.
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i thought that the bonus culture was being blamed for part of the banking failure so it seems pretty obvious to me that they should be canned.
of course bonuses are always linked to targets and i've never seen a target yet that isn't corruptible to your own purposes (e.g. hospitals forcing you to start with your gp again if you have to miss an appt that messes up their numbers)
of course lord 'all aboard' mandelson is still prattling on about attract and retaining the best. why is it that they always use the 'must compete with the highest paid in the world' argument for execs but 'must compete with the lowest paid' for the rest of us.
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They should all pay back bonuses as a matter of principle, I can't believe there is any question about this..!
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No bank receiving government money should be allowed to pay bonuses. Basic salaries should also be capped. Those individuals who can be shown to have received bonuses for deals which contributed to the banks' downfall should be forced to repay them.
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I have just watched you on the 10pm News and was interested in hearing you stated that the tax payers ie Government should have a say in whether the Banks should pay bonuses.
Earlier this week I sent the following to epetition at Number10..
'Give a better deal to ISA savers'
My cash ISA saver rate is now paying just 0.15%. Is this fair ?
I petition the Government to comment on this rate of return.
The response I received was :
I'm sorry to inform you that your petition has been rejected.
Your petition was classed as being in the following categories:
* Outside the remit or powers of the Prime Minister and Government
Therefore maybe you could correct your statement and tell the public that the PM and Government do not have any influence in what the "publically owned" banks do.
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These bankers are having a Marie Antoinette "Let them eat cake" moment showing a dangerous disconnect from the rest of society.
The fact they still think they can get bonuses actually shows all the worst personality traits that have been deliberately selected for when hiring and promoting within the banking sector and which have caused the banks to lose so much money.
Trying to claim bonuses under the present circumstances is not just greedy it is also incredibly stupid. Any rational person would be keeping their head down and their mouth shut until the wave of public hostility blew over rather than stirring it up to the point where the government can no longer protect them from a police investigation.
The banks would be a lot better off firing all these testosterone fuelled 'masters of the universe' and replacing them with computer programs, women and older men that have cool heads and make rational, long term plays and charge a lot less money.
There was a huge missed opportunity in letting the banks continue 'as is' without going through some form of pre-packed bankruptcy. Bankruptcy would have allowed all employment contracts to be cancelled and renegotiated and allowed restructuring across the failed companies to maximise cost savings.
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Why should ANYONE in the banking system get a bonus in the current crisis?
Get real, people. Your salary should be enough for you to live on like it is for 90% of the population.
If I hear of any banker getting a bonus payout, I will take action.
The management team of every bank in this country should publicly announce NO BONUSES. NOT NOW. NOT NEXT YEAR. NOT UNTIL EVERY PENNY HAS BEEN REPAID TO THE TAXPAYERS, TO YOU AND ME.
Wake up, for God's sake! Your recent decision making has been catastrophic. Bonuses??? What for?
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My apologies to 'Bones'.
It's not life as we knew it, Jim.
It's certainly not Treasure Island for most of us, eh, Jim lad?
The British Navy once relentlessly hunted down and hanged the pirates: mind you, they flogged their own seamen to death too!
N.
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Mr Peston, I'm flattered.
"almost every senior banker trousered bonuses over the previous few years on the basis of profits that turn out to be a chimera, an illusion, unreal.
The point - which is implicit in Adair Turner's analysis - is that banks' wholesale banking and treasury operations booked as profit both capital gain and income from assets that have subsequently turned out to be poisonous.
Much of this capital gain never crystallised, it was not converted into cash. Yet bonuses - in the form of hard cash and shares - were paid out on the basis of this nebulous capital gain."
Your post was today, Turner's speech on the 21st Jan.
I'm flattered because I wrote in my blog on Jan 19 :
"Given that most of the banks would be bust without taxpayer guarantees I don't know why they don't just wind them up in a controlled manner, transferring assets and liabilities to the state, before beginning the process of building a case against their boards, freezing their assets and attempting to claw back their bonuses, property and pension funds - on the basis of the effectively fraudulent accounts, based on flawed asset evaluations, which have showed such huge profits over the last ten years."
While the solutions proffered by yourself and Mr Turner ("give the banks lots of taxpayer money") differ from mine ("nationalise without compensation and arrest the executives"), I'm chuffed that we seem to agree on what the problem was - and that I said it first !
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96: "I recently had dinner with senior bankers whose view was, "if these people who are complaining wanted big bonuses, they too should have worked hard and become bankers". Definitely different planet."
Ah, maybe what we all suspected... the bonus is regarded as a reward for *getting* the job, rather than actually doing it well.
Can't see any massive change to the social contract happening though without some further crisis or catastrophe taking place: an actual bank failure, a threat of war or a massive swing of voter support to the Lib Dems.. :-)
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Robert Peston on News and Ten repeating (but not agreeing) with argument that bankers should get these high salaries "in order to prevent the banks loosing the best Brains"
Good old Vince Cable just asked on Newsnight where all these people were going to go for new jobs if they were put in their place!
My question is simple,
What is the evidence that these people at or near the top of the hierarchy are competent, or are more competent to do their job than many many other people lower down.
It is easy for people in these salary cartels to claim they are competent ... but what is the evidence?
I know ... the evidence is that they are getting paid so much ha-ha !
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#48. trout8 wrote:
"Have bankers obtained a pecuniary advantage by deception? Has any banker dishonestly given information or made any statement which knowingly or recklessly was untrue or misleading and intend by doing so to make a gain for themselves or another or cause loss or the risk of loss to another?"
Yes.
I have the documentary proof.
The Ombudsman agreed with me.
This was the bonus culture working at the lowest level.
I have a friend who was a bank manger. He got out because he had a conscience and would not sell inappropriate products to his customers to meet targets that were related to pay.
How can you trust someone with your money when they are incentivised to be less than honest?
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No, no, no, Robert, You've got it all wrong.
These people must be hanged by the neck until dead, nothing less will do.
Metaphorically speaking, of course !!
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Bonuses for RBS etc - SHAMEFUL and DISGRACEFUL...the government must only pay minimal bonuses where there is very good reason. For the vast majority the employees must accept no bonus or be sacked and fight it out in the Courts. Bankers pay must be cut.
As for the government they simply don't have a clue. They are very largely responsible... Interest rates to 1% 0% INTEREST RATES SHOULD BE RAISED. This is a house price buble - house prices rose in January and gazumping has returned to the property market , I kid you not. PRICES MUST FALL!!! maybe 20- 30 % more. No one will deposit with British Banks therefore they cannot lend!!! People who bought property (and the banks that lent to them) have only themselves to blame!!!
Recovery depends on INCOME TAX cuts raising STAMP DUTY and getting property prices back to a reasonable level - it hasn't happended yet...
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It is interesing in this context to think about the following principles, even if the evidence is uncertain.
Parkinson's Law:
The top executives tend to multiply their subordinates and give them high bonuses, thereby justifying even bigger bonuses for theselves.
The Peter Principle:
The top executives rise in the hierarchy because they are competent, until they reach a position where they are incompetent. Conclusion - many top executives are incompetent and certainly do not deserve big bonuses.
The Dilbert Principle:
Executives (particularly in middle management) are promoted to higher positions, and fat bonuses, to stop them causing damage to the organisation ... yes the kind of damage we have seen done by bankers.
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Bankers should not be paid bonuses because they have provided no evidence that they are competent in the jobs they do.
By contrast they have provided evidence that they are incompetent.
Let us have some good younger (and older) people who are prepared to work hard in banking jobs for a salary that matches that of a government minister, for example.
And let us be happy at least that Gordon Brown does not pay himself a bonus of x billion a year on the ground that it is small % of the budget that he is "in charge of"
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This thread should not be left to die ... not until there are one million posts.
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Pesto, you always are great: you have your finger on the pulse, even if it does take time to come out sometimes.
I want to join in the amazing following you have created of sensible voices of the people - democracy at work, but we have to rely on you to input our views to the establishment.
As others have noted, pity your minions can't read at a rate of greater than one blog every two hours...
My simple contribution for today is - if people are given the chance to play with other people's money, they will make the most of it, and make the most of their mistakes. Look at what Broon is still doing, giving our money away to those who have lost it, and still using the thinking of the people who got us into this problem (incl him) rather than listening to voice of the people in blogs like this.
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I am annoyed at those people who are referring to 'bankers' and including the frontline branch and admin staff in the bonus debate. No one in my branch earns any where near the average wage of £24k.
We were set targets at the beginning of 2008 and having exceeded them - people are begrudging us a modest bonus. At the end of 2007 we were lucky to get £250! Is this so bad?
Change our contracts this year and yes, ensure executives do not get bonuses - what did they acheive?
Many of us are on notice (after 25 years of service) that we may also be made redundent...processing work has gone to India... !
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Bring the bankers to task!
Go on Freddy, you are championing the masses who have lost so much!
I want to see these guys in court just like Sarbanes, Oxley and Madoff!
Name them Freddy!
http://news.bbc.co.uk/1/hi/programmes/the_daily_politics/7870067.stm
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Setting aside the point that our favourite pantomime villains (bankers) are involved, the notion that ANY business should pay bonuses to staff when no profit has been generated is completely absurd.
If a business pays bonuses which are not funded by profit then they are adding to their debt, making an already bad situation worse.
If there are any senior bankers who don't understand this simple truth then it's time for them to move on so someone competent can take their place.
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Bankers repay bonuses?
Naw, they were pure dead brilliant bankser n at
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I guess you've been busy over the last week, I hope your not suffering from an infection of enforced P.R. BS
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‘Scuse me; “Take the houses, the investments, the cash, the works of art, the cars etc.”.
Hasn’t that already been done before not to mention the gold teeth fillings, the spectacles, the hair and clothes, the health and lives and family cares. In their absolute misery and fear, only crumbs of dignity, somehow, stayed with the survivors.
I am against protectionism for the sake of our World’s return to sanity. We are not nearly embracing the insanity of the last century.
A thought: In nine years of conquest, Ghenghiz Khan caused the deaths of over 30 million people using horse, lance and sword. All the murderous leaders of the last century did not match that toll together, even with modern methods of mass destruction.
What if they’d had his mindset; who’d be blogging now?
On that, I am overdosing on this blog when I have my own survival concerns to address.
N.
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#127 Spot on
When will the pension funds act to recover their losses from the CEO's and CFO's that are culpable - not for making bad investments decisions but for covering up and mis-representing the holes in their balance sheets which they have known about for 12 months or more? When will the serious fraud squad investigate both the CEO's and CFO's and the auditors that signed off these accounts and move to freeze their assets whilst a thorough investigation takes place.
A spell in Strangeways at Her Majesty’s pleasure is likely to bring home to those in financial services, that thought they had a one way bet with no personal down side risk, the only moral hazard they will really understand
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When Enron collapsed the directors were taken to court. For what? For massively overvaluing their assets and therefore defrauding it's investors, sound familiar? !!! I can't believe the current debate is about curbing bonuses, or paying them back retrospectively. The debate should be about the corruption, the fraud, the deception at the higest levels in banking, it shouls also be about the ineptitude of regulatory authorities and dare I say it, the complicity of Government itself in allowing and even supporting the deception.
They tried to pin it on Mr Peston (and others in the media who dare speak out) in the House yesterday, boy did he make them skirm when they asked about his sources. They did not feel comfortable with his response. They knew he could blow them all apart. (Robert is upset now and they have attacked him, so watch this space, I guarantee some brown stuff will get thrown now)
Iceland have brought their Government down, soon they will bring those responsible to account!
It's time we marched on the Government and ask that they all resign their seats, then we can have an election, followed by a full scale enquiry into this mess, then court cases, then prison for the gulity. They should face the music, just like anybody else who is fraudulent, deceptive or is derilict in their duty!
I want those who were in control and on watch to face a public trial; bankers, regulators and ministers.
LET'S MARCH IN MARCH FOR BRITAIN!
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I find some of the bonuses handed out to some of the bankers quite abhorrent.
However, please let's put some perspective on this. As a non banking example, over the last 10 years the retail industry has reported successful profits and this industry is based upon bonuses - meet this target and you get x% of your salary. Easy pickings as the market has been rising. There was no real extra effort. It was previously expected that profit would rise year on year.
Crikey, even doctors get bonuses for a certain number of patients quitting smoking.
It's just the way that the game was played.
Bonuses are a way to make employees perform better and achieve better results.
Fair enough, it has been taken advantage of, but what is the alternative? No-one has mentioned this.
Are we all expected to receive the same pay because we are deemed to be at the same level, despite some workers sitting on their backside, while some actually deliver an improvement to the company's profits.
Not everyone can be promoted to be managers, chairpersons etc. Bonuses are the only other way to offer a fair performance related pay.
Too many bloggers are quick to offer criticism of recent activities with no real alternatives.
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Wow, what an incredibly easy bandwagon to jump on to. Just a few years ago, every account in the world was the devil incarnate since they helped to create the Enron fraud. Just last year, every oil and gas executive out there had to be ashamed of themselves for raising petrol prices to the point where most European (even American!) drivers thought twice about making a car trip. Now it's the bankers turn.... of course it's all 'their' fault.
But who are 'they'? I think you'll find that most bankers are equally surprised and distraught that the markets collapsed so completely and so quickly. Perhaps a few very senior executives/regulators/politicians became aware that the whole financial world was operating in a giant bubble some time ago (maybe as early as 2006/07?) but lacked the courage, the will or the resources to do much about it at that time since things seemed to be running just fine, thanks.
However, the vast majority of City workers have simply been doing their jobs, many of them very diligently indeed (in how many sectors would you see people working 80-100 hours per week, if their contract specified 38 or 40??) and meeting the targets set for them. Of course in hindsight those huge bonus pools that were available at financial firms should have been substantially less, but how does it 'redress the balance' to punish that majority of hardworking people now?
And let's not forget... the salaries of those 'infernal city workers' (not just bankers, but the related lawyers, accountants, consultants, systems engineers) that have driven the economy in places like New York and London for many years, helping to create a living for restaurateurs, coffee shop owners, hotel receptionists and taxi drivers. What they didn't spend was probably invested... and therefore just as worthless now as everyone else's house or pension money.
Of course, someone is to blame for this whole mess... and in my humble opinion, financial regulators and rating agencies deserve to be singled out. No, people working there didn't receive enormous bonuses, but talk about criminal negligence...
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The bonuses cannot go back, unless fraud is proven in a court of law.
But no more bonuses should be paid. Certainly not for 2008. Let those who object resign and go and wreak havoc elsewhere. I don’t think that there will be a tide of resignations, and for those who do go, well, this is an opportunity for someone who is not related to a Kamikaze Lemming to maybe run a bank for it’s shareholders and the public at large.
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I think that no one in banking should receive a bonus this year, next year and for the forseeable future. Bonuses must only be paid for exceptional performance, which obviously is not the case at present.
Asking them to pay back their illgotten gains would not be possible as they will already have spent them on luxury cars, property or put it out of reach in off shore investments.
I worked for Nat West in the recent past in branch banking and bonuses were only a fraction of salary, not a multiple, and were very modest. Only the top people received large bonuses.
Also, as a result of buying Nat West shares with any bonus and through SAYE schemes, I am now an RBS shareholder who feels betrayed by Fred Goodwin and others who did not act in the interests of the long term future of the bank. Like many others I paid the first rights issue at £2 per share only to find the price plummet further redering my savings almost worthless.
The CEOs, Chief Executives and senior management of banks have all lost the plot and should be revieved of their posts.
The notion that the best staff will leave if bonuses are not paid is nonsense - where would they get as good a job elsewhere?
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There are bankers, there are those working at banks and there are swindlers pretending to be bankers.
Honourable bankers would be willing to return bonuses from last years. Those working at banks are collateral damages of the swindlers' acts. Fakes look, sound and act more convincingly than the real thing.
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what is the point of the BOE lowering interest rates when the problem is not the cost of credit but the availability of credit. Surely this will just exacerbate the problem as savers realise it it a waste of time leaving money in deposit account.
Also i notice that a slight rise in house prices was rejoiced as maybe a "green shoot".....maybe i am missing something but wasn't the over priced housing market one of the problems....Why then are all this pathetic governments "solutions" aimed at restoring the housing market?
on another note...i would have liked to have been in the room when GB found out Tony Blair had trumped him in meeting Obama.....
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How can the profits be a chimera?
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So the bankers want their bonuses do they.
Well here's what I want:
1. Names of those to whom a bonus will be paid
2. Address
3. Wife's name
4. Children's names
5. School name attended by said children
The cloak of anonymity is all these leeches have - take it away and let society judge them.
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It's not all the banks' fault you know. Interest rates were kept artificially low for too long. First by the bank of england (Eddie George admitted this to the Treasury Select Committee), and secondly by Gordon Brown when he chaged the measure of calculating inflation to CPI. If you take things that are inflating out of the calculation (housing) there will be low inflation and low interest rates. Money was cheap, we all wanted some and the banks gave it to us. I think ther is a sub-prime situation in this country.
Chris in Cambridge.
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Some of these people should be in prison and any ill gotten gains should be confiscated by the courts.
The laws are there to prosecute these people, it is just the political will is not.
After all the heads of all these organisations are from the same pot, Oxbridge, Eaton etc. It's just another example of how the old boys network is looking out for itself.
The sense of injustice is culpable and the hard working British people are sick to death of hearing about this. How can tell a young criminal to change their ways when they can see this going on. Any sense of morality is being ripped out of the heart of British society.
Maybe a winter and a summer of discontent is just around the corner?
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In the early 80s the unions apparently bought the country to its knees. They had their assets sequestrated. In 2008 the bankers bought the country to its knees they left us the bill. But they still have our money!
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I seldom get aroused by the news but the banking bonus issue has really got my goat.
I would like to suggest to all banks that they withhold bonuses then there is little incentive for their personnel to jump ship. Moreover if one was a banker would one leave a safe and well remunerated post in current conditions just because the bonus was withheld?
In any case it must send the wrong signal that failure is rewarded. Recent events must have been a nadir in banking performance so how can rewards to staff be justified?
If the public owns 70% of RBS how do we get our votes and views across to the government?
Bonuses must not be paid.
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Why are all these arguments so convoluted?
If a company makes good profits then good bonuses should be paid.
If a company makes a loss in any year - no bonuses!
What is so difficult?
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But are they really happy?
http://wannabepm.blogspot.com/2009/01/what-slowdown.html
There should always be consequences but now is the time to refocus onto a more pressing issue that requires a larger than life, journalistic character. One that can wield his megalithic superpowers over not just the economy. Are you thinking what I'm thinking?
http://wannabepm.blogspot.com/2009/02/all-carboned-out.html
Take that photo out of your wallet NOW!
Big Kisses
Ivor X
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12#
All small shareholders often criticised the big bonus culture for the selected few in every bank but the large institutional shareholders were also part of the same culture and would not rock the gravy boat. Performance bonuses were introduced for the foot soldiers as these sums were excluded from pension entitlement and saved the banks money although these staff regarded the bonus as part of their annual incomeand in many cases, depended on it to make ends meet as all bank staff are not highly paid.
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Indeed this whole issue about bank bonuses is not only appalling, but pathetic. Shame on those who still insist that bonuses should be paid. It is bad enough that these banks have to be bailed out with tax payers money. To add insult, over one million people have lost their jobs within the last three or four months and some have taken pay cuts just to survive or accomodate others!
How shameful! If they were moral enough, they would never have spoken about bonuses, not under the current dispensation, not even for the next couple of years. For as long as I continue to pay my tax, I shall use every judicial means available in this land to oppose any such payments, If any of these bailed out banks chooses to go ahead with plans to pay bonuses (which, of course, they have not earned, going by the recent crisis).
I am sure the majority are with me on this. I rest my case!
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Should bankers be paid bonuses? In "less enlightened" societies like China, they might wind up being executed, just like those who injured and killed people with their hairbrained greedy schemes to make milk seem more wholesome. Considering how much damage they did and how lightly they will get off in Britain, America, and other enlightened societies, I have to wonder which societies really are the enlightened ones, China or us. Personally, I think the Chinese model would put future bankers on notice. Your solution would actually reward them for their crimes. Where is justice?
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Yes!
They should repay the bonuses and they should now be paid with the toxic debt they created, not cash. I think this is a FAIR reward.
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If Gordon and Mr Mandelson won't tell the banks that they aren't getting a bonus for a very long time, then Jeremy Clarkson will.
No one will like what he says, least of all our dear moderators, but hey, sometimes especially where thick-skinned politicians and bankers and regulators and risk agencies are concerned, you've just got to tell it as it is.
Jeremy for PM!
Just someone, anyone who will do some straight talking.
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YES !!!
From Cheshire Cats, Fat Pigs, Rabbit Holes and Tea Parties
'Metamorphing into fat pigs
Their snouts in the
Treasury trough truffling
And scoffing
And having a ball
While squeezing homeowners
Out of their homes
And squashing companies
Both big and small
By not lending loans at all'
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Seeing as we are in this mess, everyone is in agreement and the government needs a populist measure, we seem to have a golden opportunity to implement some regulation to ensure this never happens again.
Let's have a law on performance related pay. Your pay can be related to performance but over the length of the performance. Instead of the current good or bad you still get your bonus.
It makes my blood boil to think a banker can cook the books to show a big profit this month that has disastrous long term consequences, bringing their bank and the whole global economy to it's knees.
I doubt we can get the bonuses back but if in the future we ensure that they aren't paid in total until their performance is fully evaluated, we can ensure that we don't incentivise these greedy pigs to mess things up for personal gain.
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Huge numbers of people are presently being fired through not fault of their own. No bonuses for them ! Should we worry that city traders and their like at the top end of the previous financial feeding mania bankers will be demoralised ? This is the outcome for all employees even some in the public sector as in Universities let alone in private enterprises of all types. What must be recognised is that most employees are
fearful about their future employment. Result = low morale all round. Many will not be receiving their annual bonuses notwithstanding the fact that their own branch/department/subsidary may be "profitable" for the past year. As for the RBS staff, they enjoyed the benefits of this huge bank in the good days so must collectively suffer. This is the norm in any huge Multinational.
As to the vaunted value of hot shot traders and the like, most as proven by a long term study of their records rarely sustain their performance. If they leave RBS will there not be plenty of others eager to take their place?
If for reasons that we mere non-bankers do not understand, it so crucial to pay a bonus then I recommend the Prime Minister put a cap on the amount so that those at the bottom receive a % higher than those at the over £50K salary level; a wage that is a fortune to most hard working employees. For those over £100K then a sensible cap should be place on the amount of the bonus.
Senior Bank employees are part of society. If we are to safe guard a mature Democratic Capitalist society at a time when Depression threatens then those at the top must visible be seen to take their share of the pain. There must be no exception
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Mr Peston, your analysis and discussion on financial topics is brilliant and insightful and explained in a manner that all can understand. I personally think you should be chancellor of the exchequer, I would vot for you. You really do understand how the vast majority of us feel about what is happening around us and I cannot believe that you are being raked over the coals for doing what you do.
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The fact is people are by their very nature greedy. People who work at the top levels in banking are also (generally) very intellingent. Those who have the job of regulating them are not and nor are those who work in the public sector. It's not just the incompetance of the regulator either, the accounting regulations have allowed banks to feed off non existent profit and implode.
Without wholesales changes this will continue to happen and go on. For sure though I agree that there should be retrospective tax legislation on the bonuses paid to the spivs in the banking industry as long it is targeted at the excessive cases.
Going forward the accounting regulations need changing as do the tax rules for bonuses and salaries received by those who work in banks.
Not only must this not happen again but these individuals need to pay back what they have embezzled from us all.
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Roy (57),
In the present circumstances, that may well lead to unjustified gains, since the shares are so de-valued at present. I think you should have a look at my #55 for a more reasonable pricing method.Peace and Equity
ed
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The absurdity of the banks paying bonuses is insane. A bonus is a reward! If one banker from a bank that has been bailed out by the taxpayer receives a bonus of any sort hard working man on the street 'Joe Public' should band together and refuse to pay any loan repayments they make.
Whist this is a little anarchic if enough people made these decisions and a momentum was gathered someone up there might start listening.
Something has got to be done to stop this 'bonus as standard' culture.
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Get a grip!
I think that most of the people who are posting here are pointing the finger at 'bankers' as though ALL bankers are guilty of causing the current demise in the banking sector.
I have worked for RBS for over 25 years and would class myself as a 'senior' banker, so most people on this post would seemingly expect me to publicly flogged along with the whole of the RBS leadership team.
However, the division of the Bank that I work in is highly profitable and indeed contributes the highest amount of profits to the RBS overall.
I worked VERY hard in 2008, as I do EVERY year, and under the terms of the Performance Framework within RBS I should be receiving a bonus next month. Not a six figure sum bonus but a realistic amount that I rely upon to repay debts and to take my family on holiday. Why should I have my bonus withheld because of the actions of a small number of people within the Bank?
Like most other 'ordinary' RBS staff I am also a shareholder and have also lost £000's as a result of the tumbling share price.
If bonuses aren't paid to the ordinary bank staff who deserve them having worked hard throughout 2008 then staff morale will be even lower - if that is possible at the moment!
Once again Mr Peston, thank you for trying to ruin my day.
Once again, you have succeeded!!
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For all of you are suggesting that the shareholders should be the ones to control executive pay you're forgetting 3 important facts:
a) The shareholders will keep their mouths shut if they are receiving a piece of the pie (as they have done for the last 10 years)
b) A lot of companies have used legitimate (Barclays) and illegal (Satygem) ways of improving the profit margin - thereby justifying big wage increases for the board. It's not until it all goes belly up we see how much of that goes on - in fact it's 'normal practice'. Even now Barclays have fooled the market by over valuing their poo-ey assets through legitimate, but dodgy, accounting methods which will all come out later down the line.
c) Shareholders are like the people of a DEMOCRACY. They all get a vote, but just like democracy the big players influence the result. Major shareholders are often friends of the board and therefore will back the board regardless. Also, as in a Democracy you NEVER have the full information at voting time (see point b above) because big companies will hide the bad news at the AGM - how do they get away with this? - well we all know now - because the FSA isn't watching.
Face facts people, the big corporations run the Government, the Government make the rules and employ the rule enforcers and the rule enforcers pretend they're doing a good job but it's not in their interests to catch the crooks in the act. However, just as a wise man said, they do occasionally loose the odd case and prosecute someone - just to make it look good.
You're either Bourgoisie or Proletariat - there is nothing in between. You're either playing this game or you're ready to bring it to an end.
....the choice is yours....
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they have bankrupted the country. at the very least they should pay back every penny of their
ill gotten gains!!.
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Whilst I fully appreciate that the senior management of banks should not receive bonuses as they have managed huge losses and bailouts by the government, the series of "fat cat" articles peddled by the media gives the general public the feeling that all bankers are money grabbing millionaires. My experience of bankers is that they generally work very hard.
I would say that, wouldn't I, being a banker but for many of us, we view our bonus as "performance related pay". Some of us are 200% of target (due to sitting in meetings at midnight) and will receive no bonus. The bonus system allows banks to manage its pay dependent on its profit levels. Would most of the public like such a variable pay arrangement?
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I have to add a further comment. There is widespread belief that the government is mad to bail out the banking sector. We are already experiencing severe problems due to the inability of banks to lend, a problem which extends from retail banking (e.g. housing market) to commercial banking. Without bailouts credit would become even harder to obtain.
Furthermore, will tax payers complain when the government turns in a good profit in selling its shares in undervalued (seeing as government underpinned) bank shares?
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Gordon Brown will be terrified at this idea for if they have taken so much in bonuses then if they had to pay them back the treasury would also have to pay back all of the tax take too.
Catch 22
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Should bankers be asked to repay their ill-gotten bonuses, YES! YES! YES!
Will they be asked to repay their ill-gotten bonuses, NO! NO! NO1
Although the vast majority of the population overwhelmingly believes that the bonuses paid out to our senior bankers, over the past five years or more, were paid out under false assumptions there is little that our government can do to force them to pay this back. The major problem confronting the government if they try to go down that route is our smart arsed legal system. Our legal system often seems to be more concerned about legal technicalities and less an less about the rights and wrongs of a given situation. That of course is only my opinion.
Presumably if the government did manage to win the argument then one supposes that the government and shareholders would also be required to pay back all the money they recieved, over the same period, in taxes and divideneds etc.
That however should not stop the government from showing they do have some balls by rushing through some form of legislation to cap bankers saleries and bonuses as from now.
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It's a very simple topic:
Legally nothing can be done to recover these eroneously awarded bonuses unless fraud can be proved on the recipients part. But as the FSA will run the investigation I doubt anything will happen on that score.
So we are left with the morality of the recipient bankers who now surely understanding that most of their recent bonuses were not actually really earned since the deals they did are now losing billions.
Therefore if they were decent and honourable then they should return them or the cash/liquid assets they bought with them to the institutions as much as possible.
Even a token gesture of returning most of last years unspent pot - sure I understand it takes time to get back from Switzerland or the Cayman Islands - might suggest that they are not all the greedy gangsters laughing at society whilst luxuriating in their homes paid for with the misery of millions of others.
I'm no mug so I'm not waiting with bated breath for even one to do the decent thing - but wouldn't it be nice.
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#55
According to my ODHAM'S, which is near as old as I am:
Chimera. "A creature with a lion's head, goats body, and serpent's tail, a very furious and terrifying beast; an imagined but non- existent thing."
I think that Robert got it spot on.
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If a bonus is linked to success then quite logically if, under someone's management, a loss is made then that someone should share the loss and pay something back using the same formula that would have been used to calculate the bonus.
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Clearly this is a case for Yates of Scotland Yard. He should without delay be investigating all banks and personnel who were responsible for losses that caused this financial catastrophe with a view to prosecution and seasure of their assets.Its called FRAUD and should deserve a heavy jail sentance.As for the FSA,good greif.
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Robert:
Clearly someone has been at the honeypot, and that someone should be given an 'opportunity' to 'do the right thing'...
Restitution is impossible... the damage is done... trust and confidence in Senior Bankers, Audit Functions, Regulatory bodies has been forever extinguished...
We are acknowledged as a tollerant Society, but we also believe in Justice...
This is no simple 'Leeson' type affair... there are many who must be given the opportunity to consider their part and to say 'sorry', 'repent', and to 'stand aside' graciously. The mealy-mouthed utterances to date are far, far, too shallow to be permitted to stand as 'closure'...
Authorities cannot be blind to the damage perpetrated on the taxpaying public.
There is precedent for action against errant Bankers... The City of Glasgow Bank should provide some guidance ...
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We have a real problem with ownership of our problems. They have been brought about by greed and avaraciousness. My friends have debated the issue and the consensus is to back date a tax on the bonus and salary by 6 years and to take the pensions of the banker organisations which have received any taxpayers assistance in Government hands. Then place these with the pensions protection industry and allow only the maximums to apply when a full means test process has been rigorously applied. Remove any salary above a threshold of £45k and impeach those organisation which have given false credit ratings to the banks. Place the same tax an pension package on these groups. Those that need welfare need to be placed into work rehabitulation programmes. This is just to start a process...
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Its ironic,i'm working class and you would think I would support a socialist party like Labour.Yet if the Labour party actually as a condition for bailing out the failing financial institutions forced these companies to cancel these obscene bonuses,it would not be the politics of envy,but the politics of common sense(and decency).
In truth,how many of us would turn down £1 million or even a hundred grand if it was offered to us,not many I hazard to guess.It would be a very unusual person(and many would doubt his sanity) if he said "I have to refuse this bonus payment,as morally its wrong".Thats why its up to our so called socialist government to step in and force the issue on them rather than making lame excuses and further alienating the working man.
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Nick Leeson gets imprisoned for bringing down a bank. The directors of banks now get million pound bonuses for failing to manage the same.
I objected to the bail out and I object to these bosses still walking around freely. Even I could see what was happening, and will still happen as they are still allowing people to pile up debts but now it it to "save the economy."
Bosses in all British industry and MPs are all the same. Greed allows them to line their own pockets and then they have the cheek to tell us you have to pay for good management. The good managers can't get the jobs and the present managers won't sack themselves.
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There is a lot of comment about the poor tax payers bailing out the bankers et al. The tax burden of the country is highly skewed to high earners, with something like 75% of the tax being paid by the top 10% of earners. Many average workers who pay tax are net receivers of benefits of the tax paid, with free education, tax credits, healthcare etc.
From what I can tell here it is the banker's (who pay an extraordinary disproportionate amount of tax) who are effectively bailing themselves out.
They've been bailing us out for years, but they didn't complain!
These politics are all very popular, but hardly workable or practical. Brown will be acutely aware of how sensitive the treasury coffers are to financial sector pay, and it's leverage into the wider economy
So we could cut pay for the financial sector, but with it we should be willing to throw some of our wealthfare back. The two have a intractable symbiosis.
It is clearly very poor to incentivise bad management and extremely distasteful however the credit crisis was brought about by a small handful of irresponsible CEO's and the businesses they built. However there are many thousands of prudent and extremely profitable operators within the system, without which the situation would be much more severe. Should they be branded the same?
Should we kill the golden goose?
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If Obama has the guts to put a cap on the greed of fat cat bankers and business leaders to only $500,000 per annum (which is more then he the President is paid), then why do our regulators and politicians not have the same courage to cap these bonus culture and rewards for failure?
This shows that a man of the type and likes of Obama is a cut above the rest!
If we start getting politicians of the likes of Obama in Europe then Europeans will vote for the Obama types in droves!
Big fat cat salaries and bonuses have not made the UK financial services sector a success. In fact the very opposite.
We have paid big salaries and big bonuses and we have got the worst peformance in the UK financial services sector in history.
Big bonuses and big salaries seem to have attracted big failures.
People get paid a salary to do a good job. If they do a bad job they get fired.
Most peoples contract do not contain any formula about bonuses.
In the 1900 to 1970s bankers did not get bonuses and they were lucky to get a Christmas Hamper as thanks. In those days the UK banks had their golden age
As for the excuse the fat cat executives give, that we need to pay big salaries to attract the best, the lesson learnt from the credit crunch is that WE HAVE paid big salaries but we seem to have attracted only the executive directors who have been failures.
There are thousands who are very able and would accept much lower executive salaries and do as good if not a better job of running banks and companies then those who have had these fat cat salaries.
Money does not always attract the best and if it does then greed is not the best..
If Obama can stop executive directors greed by a single stroke of his pen namely an "Executive Order", surely our politicians can do the same in parliament?
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I think it is totally immoral that these fat cats receive bonuses from businesses which are unsustainable without support from the taxpayer. In actual fact, being a lawyer and totally reliant on fee earning income to sustain my business and pay my staff I find it sickening that my taxes are used to paying their bonuses. Who is going to bail me out when my business goes bust, certainly not Gordon Brown or Alastair Darling. These bankers have robbed "clients funds" to gamble on the stockmarket they should be banged up in jail for gross misconduct and certainly not rewarded for failure. My business is struggling in the present economic climate through no fault of my own. I'm certainly a very angry tax payer, business owner and individual that cannot sustain the high level of Labour's incompetence in splashing around our cash to bankers and the public sector fat cats. Labour are killing off virtually all of the private sector businesses. We will soon all be on Jobseekers Allowance and difficult to employ by anyone since we're qualified solicitors and have been tax payers since leaving university 25 years ago.
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This comment was removed because the moderators found it broke the House Rules.
I work for a bank. I am not a highly paid executive. I am pressured on a daily basis to be compliant and 'put the customer first' but then receive a kick up the behind if I don't hit randomly set and almost unachievable sales targets set by the very same individuals who don't see customers but sit in boardrooms counting their large salaries, huge bonuses and listening to shareholders moaning about the lack of returns. I worked damn hard during the last 12 months, always putting the customer first. I qualified for a bonus under the scheme set out for my employer and I deserved it. I am exactly the same as anyone else who works for an employer who sets out a bonus scheme. So, don't blame ALL bank staff as most of us are in the same boat as you. Just pray that the promised review of banking practices outlaws pay and bonus schemes based on sales performance and changes it to other service and compliance-related criteria. The immoral few who you never see are the one's who are in the wrong over all this. Oh, and whilst I'm on, if almost global deregulation of the banking industry hadn't taken place, allowing almlost anyone to enter the market, banks wouldn't have had to look at other ways of making money (it's called diversification Mr Darling!) which resulted in the securitisation bit including the sub-prime piece which initiated all this. So, Mr Brown is doing a great job convincing the majority that it's all those greedy bankers who have got us into this. Well, I'm afraid that government has rather a lot to answer for aswell. If people only read the headline and listen to the soundbites of people like Mandelson (his new EFG is not worth the paper it's written on if you read the small print - didn't mention THAT in his press conference did he now?) then no wonder every member of bank staff walks around with a target on their back. Those who actually understand the issues know that a hell of a lot more people that top executive bankers and shareholders have had their fingers in the pie over this mess.
So, before you comment and say 'it's all the fault of all greedy bankers' - READ, LEARN, UNDERSTAND and then make comment on an informed basis so you don't look too much of a prat.
Thanks You (if this ever gets published)
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I work for a Bank and while I agree that a lot of the top bods should not get a bonus, I have worked hard to get mine. I am on the bottom rung of the ladder and my pay is not great so work hard for my bonus (a very small amount).
A comment by FOLKDEEJAY says that we should be downgraded to public sector pay scales and earn the same as council clerical staff. If my pay was put on that some scale I would be getting a pay rise as I could earn more working for the council than I do now.
Its not far to brand all bank staff with the same brush. Most of us are just working to earn the money to feed and clothe our children and pay the mortgage. We don't all agreee with the banks policies and would like to chnage our jobs but in the current economic climate its not easy
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Does this government think the people of this country are stupid? I find it a gross insult that they should even consider allowing these banks to pay bonuses to any of their staff using our Tax money. The company I work for has just had their income reduced by 40% and I am lucky to be still in a job. I would not expect to see any bonus or pay rises during this recession. There are many more people less fortunate who have had pay cuts or lost their jobs.
Mr Brown - Middle England will be on the march if you are not careful. Time for a change.
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All bonuses in business should be earned. They should be directly linked to sustainable profit performance. The greedy bankers who took massive risks and earned massive bonuses in the last few years which got the country into the mess it is in should start with a negative bonus. ie all bonuses earned over last 2 years should be repaid from future bonuses and no bonus pocketted until their account was in surplus.
It is absolutely inu=equitable to expect Joe Public to fork up when they have performed so abysmally and recklessly.
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As a businessman trying to salvage what is left of a business since the collapse of banking due to the total incompetence of government, banking officials and high-flying fund and investment managers, I find it immoral and totally unacceptable that there is a consideration to pay bonuses to banking staff.
Had the government not bailed out the banks, these so-called members of banking staff would be unemployed as are many of this nation's people affected by the banks steadfast attitude to keep the money they have now been given instead of allowing the money back into the economy via small businesses.
Small businesses are the back bone of this nation they contribute more to the economy via taxation and employment than the majority of the larger companies, yet we are the first to be affected by the infection of banking mismanagement.
If my business was operated and run in a similar manner to that of the banks I would have been shut down and possibly prosecuted.
To realise that bank staff may get a bonus for failing at their job is beyond me, be it contractual or not.
Had a bank completely folded I know the implications to their investors would have been disastrous but government funding to guarantee the entire funds of innocent savers would have been better than to throw money at people who 'bet' on market economies on a high risk, high yield short term result, but then, unlike many of us it was not their money they were playing with.
Undoubtedly there are members of banking staff who have and continue to work very hard to achieve results and targets set by their managerial staff. Those same people will now find themselves under a greater strain to meet targets placed upon them by their respective managers and so-on.
To those members of banking staff who did achieve their targets I am sorry. But like my business it has to be run on a team work basis, if I fail or any singular member of staff fails it affects everyone within the set-up.
Let us be realistic, if the institution you happen to work for loses more money than history has ever shown, the system failed and as a result should accept the fact the money is not there to be had.
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I am compelled to reply to the blog regarding bonuses for RBS staff but can see no justification for any bonus of any description to anyone regardless of contractual obligation bla bla bla as far as RBSstaff or any other Bank bailed out are concerned. The reality in the case of RBS is the Bank would have gone to the wall if not for tax payer recapitalisation and whether or not any individual has performed miracles within their little world of the organisation it simply doesnt matter - sorry - end of story. If a business goes to the wall in normal circumstances because the strategies by management are are wrong (never mind reckless in the case of RBS re its acquisition of ABN to name but one) then generally speaking the livelyhoods of those individuals are wrecked/destroyed and they are unemployed. Bonuses to be paid for for the shop floor workers caught up in such situations ? - of course not - they dont even have an income as a result. So who the hell do RBS/Bank employees think they are that they can consider receiving any bonus of any kind not only for 2008 but until the majority shareholder i.e the tax payer /government says so - the business went bust and thank your lucky stars that you still have jobs. I m afraid its endemic in the culture that created the problem within banks that dictates this greed and selfishness. As an acid test of humility in terms of what has happened ask the RBS staff if the £1billion the bonuses will cost could be used to save jobs of colleagues instead of going in their pockets and the answer you would get would give you the answer to the reasons as to why the Bank is in such a mess. Is it the individuals fault - no not really - the culture of the past 20 years has been a performance culture that has driven target growths of c20% plus per annum (ask the governement to ask the Banks where they got 20% from and I guarantee they wont have a sensible answer) - across Banks which has led to dysfunctional behaviour in ALL areas of the organisations to acheive target in order to keep the job and hopefully earn a bonus !.The culture is dripping off the walls from Jonny Cashier selling credit cards to those customers that cannot afford it all the way through to traders involved in foreign syndicated debt structures with huge associated risks . If I m right, and I know I am, then culturally they need to change the way in which they operate at all levels. I m afraid the people that are currently in situ largely date from pre government intervention and most of them dont know any other way as they arent old enough or experienced enough to know what to do
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Among the comments here is an overwhelming - and understandable, but irrational - backlash against banker bonuses.
Not good news.
Taxpayers own a majority stake in RBS.
If the bank can be restored to health, taxpayers may even turn a profit on this stake.
Those who contributed to the losses should, of course, not be rewarded.
But making it perfectly clear that _nobody_ in RBS will be paid bonuses for years to come will lead to an exodus of talent, set the seal on the failure of this organization, and set a match to the pile of taxpayers' money that has been invested in it.
To argue, as people have, that bankers can scarcely just walk into the next better paying job in the current climate is mistaken. The mediocre bankers can't. The individuals who generated proven profits in the tens of millions of dollars can go wherever they want, and if the partly-nationalized UK banks can't pay them, then they will go to banks that haven't taken taxpayers' money, or outside the UK, or to hedge funds.
The top talent is still in demand. If RBS won't pay them then they will lose them, and with them they will lose even the potential to turn their fortunes around, and ultimately we, the taxpayers, will lose.
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If the bankers cannot in any way be prevented from getting bonus payments this year, why not insist they are paid in shares in their bank and that the shares are valued at the historic maximum price seen in the market.
At least those of us pensioners who have lost heavily as the share prices have fallen will know all the people involved have suffered, if marginally by comparison, too.
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Since the 'fat cats' at the top of the banks are responsible for the current financial crisis, perhaps instead of giving them bonuses related to profits, they should pay deductions related to losses that their companies have incurred, perhaps then bonuses would be correctly related to what they are i.e. 'profit related bonuses', which would be an incemtive to make their companies profitable once again!
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We all have a social responsibility. Paying back bonuses is part of this. Investment bankers are nowadays nothing but gamblers. The banks they are working for are their pimps.
However it is our money they are gambling with yet we cannot chuck them out like any good Casino can - so make them pay back the bonus they did nor earn rightfully.
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# 249 shortershrift
You insinuate that if anyone is talented in banking they will ONLY work hard IF they have indecent bonuses, added to high salary, and if not they will follow the money trail elsewhere.
If this is true, fair enough, these banks should go to the wall sooner rather than later. If not, let them walk and let some talented realists get on with it.
"IF the bank can be restored to health, taxpayers MAY even turn a profit on this stake."
And if NOT we will now all be complicit in paying over the top for the overpaid talent that could not/did not save it. (so we have all been well and truly conned... and no right to complain)
There are talented footballers who walk - and there are always more to replace them. And of course some actually stay, dare I say it, without breaking the bank.
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This matters jumps up for discussion (and absolutely rightly so) with just the same sensitivity and consideration for the victims within it, viz. we tax-paying gophers, in the same way to UK workers when our PM chanted he would like to "see more trade with China"
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Today, yet again, A. Darling tells us that " there is nothing wrong in paying bonuses for success"
Quite so dear Alastair BUT, in terms of banking bonuses do you think you might enlighten us as to what in your view constitutes 'success'.
And having done that, perhaps you might be so bold as to indicate what limits you feel should be imposed. President Obama seems to have a grip on reality and he's only been on-job for a couple of weeks!
So, why do you need yet another 'review'
of how banks operate? is it so that you and Gordon can once again hide behind the advice of an 'expert'?
Courage mon brave.
Arch-bishop
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The level of stupidity and hysteria amongst a significant number of respondents above is alarming. Calls for bankers to repay bonuses, be prosecuted or face 12 months without salary is lunacy.
Simply demonstrates that there are a huge number of people who simply have no understanding of how banks, or there pay structures, work.
Can we please have less of the Daily Mailesque ranting.
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If Bankers are made to repay previous bonuses, then perhaps as a gift to the Nation the MP's, deselected at the next election, due to poor performance should repay the 6 figure sums they get to pay for their holiday homes ooops....I mean second property.
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#253 veryfaraway
The football analogy, if developed further, serves to highlight the problem.
Suppose Chelsea is facing relegation. The performance of the manager and a few of the players has been woeful.
So you get rid of them.
Do you also punish your superstars, Anelka and Lampard (23 goals between them so far this season), for the team performance?
If they were threatened with a 90% cut in effective pay (which would be the case for some top-performing bankers if their bonuses were eliminated), they would simply not remain with a demoralized team.
And once you've lost them, can you expect the remaining players to step-up and suddenly produce superstar performance?
So... returning to RBS, I hope the populist tendencies of the government don't allow the sound of the mob baying for blood to disrupt the attempts to turn RBS around.
Because it's our money invested in it.
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IIts ironic that Bankerrs remunerate themselves according to the marzist theory of labour value .
ie, the value of an object is determined by the quantity labour including production bonuses , put into its manufacture , irrespective of wether the result is fit for purpose .
With AAAcountancy based On the pied piper of sedgefields[soon to be The rite haonerable lourd hole in my bucket head] promice that" things canned only get better"
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I am glad Mr Robert Peston has made a sort of volte face on the question of bankers' bonuses.His earlier piece 'Buck stops with Brown', is ingenious and obfuscates a rather simple and straightforward matter.Perhaps he was presenting the other side of the story.But it read like special pleading -- of trying to justify the ways of bankers to British public. Further few would join Mr Peston in sheddidng tears over the plight of diligent bankers [at lower rungs] losing their bonuses.These gentlemen (and ladies) should be happy that they are still in their jobs.
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# 258 - my reply disappeared into the system. I will try again
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On the issue of "if we don't pay big bonuses the talent will go elsewhere" - What talent?
We now know exactly how talented they are so if they went elsewhere that would be only too good.
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Why should it be MY taxes that bail out the banks. What have I done to deserve this? I have lived modestly and always within my means and yet I will be penalised for the gross misconduct of others.
No, it should be the bankers who have enjoyed the fruits of their labours who should pay for this.
Their houses should be confiscated, their cars and their investments, oh yes, and their juicy fat pensions.
If they knew what they were doing then they committed a criminal action and should be tried and sent to jail for it.
If they didn't know what they were doing then they did not deserve such remuneration packages and they should be clawed back.
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Very good blog.
I'd like to add that many of these overnight millionnaires bought out country homes for occasional use, and first time buyer properties, escalating property prices and making it difficult for young people to live in the towns and villages they were brought up in. Or they stashed their money off-shore. I remember years back discussing that there needed to be a 'crash' before the problems that we could see brewing up as an indirect result of the financial sector would be dealt with; it's a shame it has to be that way. Many companies stop bonuses when their profits are low. I work in the telephony industry, in Computing Science, and I now earn less than I did ten years ago. You just get on with it and adapt. At least we know that our management and directors are not earning hugely disproportionate salaries to ours. Salaries in a lot of sectors have been frozen, reduced or increased to a minimum, and this has been the case for years, whilst salaries of so called executives in the financial sector have grown hugely out of proportion. Property prices have quadrupled in some areas. The rental industry is not family friendly - you never know when you'll be thrown out because one of these financial exec's who bought the house you rent (and that of several more families) from one bonus payment, wants to buy a yacht instead. Families need to buy houses in this country to give their family a home that they can settle in and feel comfortable in. But, for the last several years, it's become difficult.
Scale the problem right down to a small business, say one that's just about managing to make a small profit - they couldn't just give out bonuses because their business is doing slightly better than the one down the road. They wouldn't have the money and would certainly go bust. You just can't dish out what you haven't got, and the banks haven't got the money either.
Banking exec's have played a huge part in putting a lot of hard working people out of work and out of their homes, and if not, making people feel worried, stressed and on edge. No matter what they've done, and no matter what's decided now, they'll be OK with their millions stashed away in property and offshore banks.
I hope this problem also results in a review of the HUGE salary divide created over the last several years.
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I wonder how much of a bonus Mr P received for his "scoops" causing the run on the Northern Rock and in effect starting the whole collapse of confidence in the banking system? I'm sure he's been suitably rewarded and will continue to feather his nest over coming months as a result. Hypocrisy or just good old pot, kettle black?
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Robert,
I work in investment banking. As usual in these articles, there is plenty of opinion, but not much analysis of the different areas of banking, minimal detail or probing and the standard blanket condemnation of all "senior bankers", itself a vague and undefined term. That's not to detract from the notion that bankers were overpaid which is true, although equally true for much of the private sector.
You should delve more deeply into what has in fact happened to the economic circumstances of "senior bankers". You would find that some of these bankers put substantial amounts of their own cash into what are now toxic instruments; i.e. they weren't just peddling them to the unsuspecting masses. They lost everything on those investments.
You should look at how bankers were paid over the last 5 years or so. Take an example of a managing director in a US bank. Most are paid 50% stock, 50% cash. A lot of these guys never sold their stock in the company. Bankers in this category could have already lost over 80% of their bonuses received over recent years. The reason being that they'd have paid close to a 50% tax rate in the US on the cash portion and 50% when the stock vests (not based on its current value which is close to zero). The net value today could be less than 20% of the original bonus.
This is not an attempt at extracting sympathy for bankers. But you will see that there are a lot of bankers who have already the vast majority of what they were paid over recent years, and that might be worth considering in your arguments around repayment of bonuses.
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#262 wednesday41
Examining the RBS financials, it appears that there are a number of profitable and well-run divisions, the performance of which has been completely eclipsed by credit-related writedowns in the Global Markets division, and writedowns related to the ABN Amro takeover.
To the untrained observer, then, it may seem that there are good people at RBS, so thank you for setting the record straight.
For better or worse, the taxpayer is now heavily invested in the success of RBS; it might make sense to stop attacking it.
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The bigger picture is that we have lost all faith and trust in the people we used to believe in.
Our politicians of all persuasions appear to use the job to improve their lot, not to 'serve' the Country and it's people.
Bankers and by that I mean anyone in the banking sector at Board Level have "earned" their salaries, bonuses, pensions and Titles, simply by doing a job.
If they are proven to have failed in that job, the Titles should be removed, as should the pensions and bonuses because they have been negligent at best and fraudulent at worst.
I can be certain that, over the years that these particular 'Knights' have fired subordinates for not doing a job efficiently.
This is not hindsight, this is an Assesment of the previous year/s work and one to which all who work for a Company are regularly subjected to.
Employees would not recieve a bonus or any addition to a pension pot and certainly not any accolade if, at our Annual Assessment, we had been found not to have done our job effectively and efficiently.
It is more important for 'The Man at The Top' to be accountable. This inspires respect and trust. I believe Sir John Harvey-Jones said, that if a Company is in trouble, you should start firing from the Top. True.
To restore our faith in Government, Banking and public life, we need to see justice and fair play done.
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The process of Penance and Forgiveness - as crystalised by Dante in The Divine Comedy
1) Confession
- genuine admission/acceptance that you were wrong
2) Contrition
- be sorry (rational emotion)
- identify the inappropriate beliefs, value, processes, reaction, behaviour etc
- say you are sorry (rational action)
- for what you did
- and for the faults (in you or the system) that caused you to do it.
- Until the cause has been removed from your being
3) Satisfaction
Reparations – offer / try to make good the damage caused
Personal Amendment – correcting the flaw in your personality/systems that caused the problem.
This will usually be met with forgiveness from the other person (and always from God).
This seems to me to be a fine expression of the European (Christian) values that we all expect, and would like to see applied to the Bankers, and throughout the Public Sector.
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An interesting amount of support for the bankers on this blog. I'm amazed. And by "bankers" I mean those top men who set the direction that their banks take in business, not the lower ones who follow the direction that they are given. The followers have no choice.
Let's remember the facts;
1. The bankers supported the absurd house price rises of recent years by agreeing sub prime mortgages. Sub prime means lending to people who cannot afford to repay. They were gambling on house prices rising forever in which case the situation would be sustainable. These people are the direction setters of the industry and they unambiguously set the direction, the wrong way.
2. They fanned the flames of white hot growth by giving mortgages on huge multiples of salary, to self certificated income and to joint mortgagees of no less than four people. How absurd!
3. By indulging in this feast of selling and securitisation they created the disaster that now affects the whole banking industry. At the same time while the feasting was going on they were rewarding themselves for doing so well.
4. The taxpayers for many, many years to come will be paying higher taxes to cover the losses made by these "fools' gold rush" bankers so that we can stabilise the banking system that they have destabilised.
Where is the level headedness that we expect from banking? Nowhere to be seen.
Should the taxpayers bear the burden of this enormous mess without complaint? Or should the bankers be brought to book? Clearly they are guilty as they all said "sorry" yesterday. However, "sorry" is such an easy word to use and it does not excuse what they have done. They benefited and we will suffer.
How equitable is that?
They should be accountable for their actions not just to their shareholders but to the public who they have pushed into debt for many years to come.
Should they be allowed to keep their ill gotten gains that have come at the expense of a ruined economy?
What they have done to Britain could be described as treason. It's a criminal offence against the whole country.
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