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Obama biffs bonuses

Robert Peston | 09:17 UK time, Wednesday, 4 February 2009

In the land of the brave and the home of the bonus, the new US president is about to impose a ceiling on the pay of executives in private sector companies that are rescued by the state.

That ceiling, according to overnight reports, will be $500,000 (around £350,000) - or $100,000 more than President Obama receives.

In the US, reports of the substantial bonuses paid to executives in banks propped up by taxpayers have been incendiary.

The impression has been created that top bankers are partying on their private jets while taxpayers foot the bill - and while millions of ordinary Americans lose their jobs and homes.

Not pretty.

The market for talent is - of course - global. Or at least that's what big UK companies say when gilding the remuneration packages of their senior execs.

So it will be pretty tricky for the British government to ignore the new US norm for running a semi-nationalised business.

At the moment, those running banks in receipt of massive financial support from taxpayers - Royal Bank of Scotland, Lloyds Banking Group and Northern Rock - are earning multiples of £350,000 a year.

The justification is that they're cleaning up a mess created by others.

But if the ratchet on pay over the past few years was upwards only, well, gravity has reasserted itself.

Those running banks or car manufacturers or any business which would fall over in the absence of funding from taxpayers will probably have to take much of their reward in the form of the nice warm glow that they ought to feel for doing their public duty - and defer the bonuses for a year or five.


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  • Comment number 1.

    Inside knowledge is
    spend large
    borrow large
    apply for a big mortgage
    while you can

  • Comment number 2.

    This is exactly why governments should never be involved in private business.

    The bailouts should never have happened due to the moral hazard it creates.

    One can only guess at the global level of fraud that has gone on for the taxpayer to fund.

  • Comment number 3.

    Oh dear oh dear.

    It really says it all when the owner of Hamleys in London, Baugur, needs creditor protection.

    If Hamleys cannot make enough profit, where does that leave everyone else ?

    Will the Supermarkets end up the only Stores in town ?

    Do we have a future of demilitarised zones and urban deacy to look forward to ?

    The Gov't needs to abandon its Thatcherite monetarist policys, before it is too late !

  • Comment number 4.

    the american mentality is to borrow as much as your monthly income can cover servicing the debts, and sell your home when you retire to catch up

  • Comment number 5.

    I hope Brown and Darling have the courage to follow suit but I wouldn't be so sure.

    As this will be a pay cut for these executives lets hope they don't enforce cuts for their workers. We all know where that would lead - Deflation.

  • Comment number 6.

    Brilliant, it will send a message to everybody that the days of exec excess are over. Brown needs to pick up on this quickly - it's appropriate for the times.

    When are shareholders going to start to ask to get the bonus's back that were paid based on poor performance?

    Make the board responsible for any bonus paid and personally responsible for paying the money back to the company if it can be demonstrated they were poaid in error.

    What happens if all these top guys leave; well we may find a whole new generation of executives who are more responsbile. Don't underestimate the talent available; or overestimate the capabilities of those in charge.

  • Comment number 7.

    Off topic, please make a good case for press freedom at your meeting later on today with the Treasury Select Commitee. I do not agree with Simon Jenkins on this subject.

  • Comment number 8.

    They also lock people up in the US - including the most senior executives, a practice we could well adopt.

    When you consider what Jeff Skilling was put away for - misleading statements about the financial health of Enron (for which he got 24 years + $45 million fine) and then look around at senior UK bankers ... and politicians !

  • Comment number 9.

    President Obama recently said "I think I screwed up, and, you know, I take responsibility for it and we're going to make sure we fix it so it doesn't happen again."

    Sadly, I doubt if Gordon Brown will be copying that particular Obama example.

  • Comment number 10.

    'have to take much of their reward in the form of the nice warm glow'

    £350,000 a year is an awful lot of money - beyond the comprehension of over 90% of the population who dream about winnig sums like this in the Lottery.

    I am presuming you wrote this tongue in cheek??

    A firm govt - like BO - is going to just say that's the rule - like it or ship out - I hope for once we are going to hang on to the USA coat tails on this one!

    For me the figure in this country should be similarly marked against the PM salary - about £175k? I think.

  • Comment number 11.

    Thanks Robert, good post, but perhaps you should investigate the bonus's being earned by Insolvency Practitioners rather than placing adverts for their services on your business pages.
    We all know Bankers and Banks are a problem but stop reacting and be proactive about your reporting.
    Small and Medium sized business's are going under NOW and the IP's are rubbing their hands, they will tell you how well regulated they are (by who!) but anyone who has previous experience of them will possibly see it another way.
    So yes Banks are very naughty but please focus on what this collapse will lead to, small and medium sized companies going under will leave one hell of a debt to this country and a social one too.
    The actions of IP's must be more heavily regulated to avoid a total collapse in business confidence and business credit.
    Unfortunately their fees will lead to more business failures rather than rescues.
    Don't let them advertise on here without recourse and do a proper programme to explain to people out there just what they do and how much they charge and how it could be done so much better with little change in the law, sort it Pesto!

  • Comment number 12.

    About time too Robert. We need similar policies over here. How about a super tax on extreme wealth? How about bonuses no bigger than annual salary? Pheeew now these things would be quite a change from the grab-as-much-as-you-can-culture.

  • Comment number 13.

    Most executive and senior management bonus schemes are flawed, resulting in short term obsession with annual balance sheet manipulation. US bankers lead the charge...UK and other countries claim parity and get it. Other captains of Industry push their packages through the remueration committee buddy schemes. Risk free Senior Civil Servants demand similar ludicrous pay packets. TV newsreaders and presenters up the ante and their bosses collude because their packages increase accordingly.
    We have a sick mentality that nobody will do their jobs to the best of their ability for a salary (however generous) ..and have to be paid huge bonuses to do what they were hired to do. President Obama has, hopefully, burst the bubble and the world might start the porocerss of returning to sanity.

  • Comment number 14.

    So if you have an employment contract which includes a bonus and you earn the company the money to justify that bonus, the company can now turn round and change things retrospectively, refusing to pay you what your contract says you're entitled to.

    Sounds a good get out for the company - and a pretty poor incentive for achieving in future.

  • Comment number 15.

    Which is why Barclays didn't go down this. Mr Diamond couldn't mange on such small amounts.

  • Comment number 16.

    So now we can see that Obama is really no better than Brown - all spin and no trousers.

    This pay cut makes good headlines but is really of no substance. The CEOs etc. will only re-arrange their pay structure so that they appear to comply whilst their bank balances remain the same.

    It's just too easy to suddenly become an 'adviser', or CEO of group members, or claim that the majority of the salary was for being CEO of registered companies outside of the USA, etc. etc.

  • Comment number 17.

    In all fairness they should'nt be given any bonuses at all. And what is the problem with American people loosing jobs?? Why all this doom mongering?
    It is so sad to see these doom mongers causing such hardship throughout the world. I care more about the jobs being lost in China/India/3rdworld because of all this. The reason why Jim Rogers still holds a US citizenship(and not chinese) is because he is worried that his children should not face the same fate as 20 million chinese workers who were just made redundant in the last 6 months.
    For the last 30/40 years US and UK population have been suffering from a disease called "Afluenza". It's only healthy for the system now that we are getting rid of it. What I am against is all the doom mongering that is going on. The talk of war, the tension between countries, etc etc.

    Remember the Katrina Hurricane,where people 5 times my size where complaining there was no food, and went on riot. This is an example scenerio of how pathetic the disease called afluenza can become. You just have to look around for other scenerios. If the population of Bangladesh started doing a similar thing, Bangladesh would burn many times over in a single year.

    When the gov and even the queen in her new year/christmas speech start warning people that 2009 is going to be tough year is when things start getting pathetic. I do not think people who have asked the queen to say such words in her speech have any kind of clue what tough living conditions are.

  • Comment number 18.

    Robert-good luck today-please let us know how you get on.

    Re bonuses-well wouldn't it be luverly if our government did the same? Not just on bonuses, but copied the inestigation and prosecutions intiative too?

    Politically these measures would be a her good move - the electorate would greet such news with a cheer!

  • Comment number 19.

    unfortunately / fortunately the global model will end up being the american model by default, just like MTV

  • Comment number 20.

    Bankers shouldn't be paid anywhere near the amount the higher levels receive.

    Money would be better spent paying their ground floor staff a decent wage. Currently it's not much more than minimum wage. These loyal staff have the hardest job in the bank-pay should reflect this.

  • Comment number 21.

    I have never understood the need for bonus culture .. if they are doing a good job they surely are getting paid in mega bucks anyway ..just how much money is needed to live the high life ! all the folk I know could live very well on the second home bonus mps get or the bonus the bankers etc get , the salarys are like a lottery win to most of us , we think we need never work again if we won a million ..

  • Comment number 22.

    Well done Mr President (Barak Obama) it is good to see that someone in authority is trying to impose some discipline on those greedy, self interested and and undisciplined senior bankers and businessmen.

    I hope he does manage to carry out his threat to limit their earnings and if these people start to complain and ask what do they get if they do a good job, the answer should be one that I heard quoted to a senior manager of a large company that I once worked for (not me of course) in the 1970's

    "you get to keep the job"

  • Comment number 23.

    Barclays could have been in RBS position.

    Varley and Diamond were going hell for leather to get ABN and missed by a whisker.

    Do not pay these great bankers any bonus at all. EVER

  • Comment number 24.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 25.

    14 peterJ42:

    Come on Peter, get with it, we're talking about extreme bonuses given to people who have, in many cases, taken these bonuses while undermining the effectiveness of their companies. In other words bonuses used as cash-cows. A way to milk the company regardless of overall company performance.

  • Comment number 26.

    #8 citynickdrew has a valid point

    apart from murder, violence and drink driving there are few if any crimes that you can be locked up for, except crimes that involve property.

    We were all promised by HMG that there was no possibility of an Enron type scandal in the UK because of our 'regulatory system'.

    What a joke and how farcical a statement was that?

    Why don't we have tough legal action against the bankers, directors and employees of the banks?

    Can't help but wonder if it is because the hold certain sectors of the financial industry has over the Government that makes HMG so terrified of taking legal action against bankers.

    Far too many dark and dirty secrets and deals maybe?

    We will never prosecute, just in case someone in the banking echelons squeals 'foul'.

    Maybe Panorama's programme on Tax Havens, although simplistic, was near the mark when it was revealed that what is hidden in offshore tax havens is 'political dynamite'.

    Back to Robert's point:

    As for corporate exec pay structures, they can always cap their pay at the minimum wage and reward each other with shares, for exceptional performance (of course!)

    If the shares 'pan', they will receive just reward for all their hard(?) work.

    It is the only fair solution.

  • Comment number 27.

    I agree with caps on executive pay.

    But the Government should impose a (retrospective) windfall tax on city workers bonuses
    Say 40% of all bonuses paid over the past 5 years.

  • Comment number 28.

    Following the news of the 10% bonus to ALL Northern Rock staff last week, it's not just the execs of publicly buoyed, failed companies who need to bask in a "rosy glow" of public service, rather than expecting a handout for failure.

    NR staff are lucky to have jobs. There is no need for them to recieve 10% of salary for crippling the company. They didn't get this much when it was doing well?!?!

  • Comment number 29.

    "The market for talent is - of course - global. Or at least that's what big UK companies say when gilding the remuneration packages of their senior execs."
    What's the market value of the sort of talent which created the present mess? Is it a non-negative value? If so, why?

  • Comment number 30.

    As Flash has plans to land a few bank directorships when he gets kicked out next year, I doubt he would want to put a ceiling on the pay.

  • Comment number 31.

    Time to ask just what do the people (men) at the top contribute. It is a cosy club of corporate incestuousness and mutual back scratching - multiple NED's and ED's and NED's remuneration committees all benefiting from the common understanding of the scale of pay and bonuses.

    The success of large organisations depends upon teamwork throughout the structure and not on the 'brilliance' of 6 to 10 highly paid execs enjoying extraordinary beneficial T&C's and contracts that usually encourage and reward short termism and failure.

    Obama's move should encourage focus on the social worth of the powerful elite that shapes our society.

  • Comment number 32.

    All of the jobs I have had I have been expected to PROVE that I could add multiples of my wage in benefit over other candidates each year to maintain my employment let alone get a bonus. This should be doubly so for people at the top of their professions. Unfortuantely we appear to have got a position with banking similar to football where a 'known name' is percieved to be worth above the odds and since there is a limited number of these it is then used to push up renumeration to those in the second tier.

    Frankly the sums are obscene. No one person should be worth more that say 20x average wage and if it is a quoted company any bonus should come in the form dividends from shares.

    These people take no risks with their own money like entrepreneurs do.

  • Comment number 33.

    Message to vegetable grower-would like to join your 'like minded group' of 17 (last count) as suggested by jericoa. can you post a link?

  • Comment number 34.

    On the latest development on the Aviva orphaned fund fiasco...this decision graphically demonstrates to me the pure arrogance of much of pension industry when it comes to dealing with 'customers' money. "Give us the dosh and we will decide if, when and how much we give you back...after taking our fees of course".

  • Comment number 35.

    No...I do not agree. A blanket solution is far from ideal.

    Not all bankers are the same...not even those working for the same bank ! Boring perhaps, but detailed investigation needs to take place before deciding on any Banker's individual pay.

    It is more important to know the suitability of those on Banks' Boards, Banks' Risk Assessment Committees, and Banks' Remuneration Committees.... are they proven suitable to the tasks appointed ? E.g. Why was a Pharmacist appointed Chairman of RBS ?

    I, as a small private shareholder, asked RBS over 18 months ago as to how (and with which skills) members of the Risk Assessment Commitee were appointed. I was given a short AngloSaxon answer.

    The person who gave me this answer is now, I understand, in Australia...possibly sunbathing on a beach near Darwin.

  • Comment number 36.

    That sounds to be one good firm step forward in resolving this mess...

    As 8. noted above with a good link, another excellent step would be to call in a few of these banking senior executives for some questioning....

    While we can hope GB will be swept up on the Obama coat tails and implement this here too, he is going to be held up to a certain amount of ridicule for having said in his Mansion House 2007 speech (again from Paul Mason's blog).....

    "So I congratulate you Lord Mayor and the City of London on these remarkable achievements, an era that history will record as the beginning of a new golden age for the City of London....And I believe it will be said of this age, the first decades of the 21st century, that out of the greatest restructuring of the global economy, perhaps even greater than the industrial revolution, a new world order was created."

    What hubris!

    What stupidity!

  • Comment number 37.

    So how many people on average wage does it take to pay a banker (in a virtually nationalised bank) 350,000 quid a year ?

    Well 4,000 quid tax per person on average wage means nearly 100 people have to go to work all year to pay for the salary of one banker.

    Or - all of the tax paid by a small business employing 100 people just to support one person who won't then loan that business any money.

    How long will people play this game until they realise its the game itself that doesn't work ?

  • Comment number 38.

    Over the last twenty years we have been sold a myth of modern capitalism being about small entrepeneurs risking there own capital to follow in the footsteps of Henry Ford and create vast industrial empires which bring concrete benefits to the masses.
    But the truth is that the overwhelming bulk of the economy is dominated by the existing multinational combines run by executives who have not risked a penny of there own capital but still demand vast reward.
    It was always our money at risk. Now it is our taxes but thats only because our savings and pensions were not enough.

  • Comment number 39.

    If the head of Lloyds, RBS etc have pay limited to £350,000 then surely the pay of other government managers such as heads of councils, hospital trusts etc should also be reduced as they run much smaller businesses. Remember that many of the heads of the banks in which the government has invested were not there when the problems were caused.

  • Comment number 40.

    Halelujah for Barrack Obama for wanting to tackle this issue. Let's hope Gordon has the guts to look at it too.

    This is obviously very difficult ground to walk, to get a balance between rewarding talent and recognising the significant responsibility & pressure that executive jobs in these huge companies bring. One thing that is evident is that due to globalisation, some companies have become too big to manage properly, and one or two individuals just can't do the job. Allowing larger salaries/bonuses just isn't the answer.

    One thing we do need to tackle is the cosy circle of 'pat my back i'll pat yours culture' in executive board rooms that are invariably filled with friendships and/or people who've moved up from the Directors positions into the non executive positions, where elements of objectivity just seem so far removed from present day remuneration committees.

  • Comment number 41.

    If we take the argument to its logical conclusion then we must assume that all public sector salaries have to be capped at this level.

    You then have to accept that junior positions and rolls will be capped at lower proportional levels.

    Boy there are gona be some very angry Quango bosses.

    How will we cope when all the TALLENT leaves the UKs Quangos.

  • Comment number 42.

    Just a thought.

    Instead of invading Iraq and Afghanistan why not invade all the worlds tax havens, impose immediate martial law and open all the books.

    ANY money found without good provenance should be confiscated and given to the exchequer of the country of the ultimate beneficial owners.

    Switzerland should be included here.

  • Comment number 43.

    #31 watriler

    what do the men at the top contribute?

    its called 'protectionism'!

    haven't we heard that before somewhere?

    politicians, government ministers, bankers and industrialists everywhere will do anything to protect their own self interests.

    its always been that way and always will be.

    we should not be fooled that it will ever be thus.

  • Comment number 44.

    #27 (& Others)

    Firstly, I am not a city exec so I speak without fear of £m windfall taxes.

    I am sorry but this idea of retrospective taxes on bonuses, or indeed payback is utterly ludicrous. The rules may have been wrong but people operate within laws safe in the knowledge that they are not going to be penalised for doing so. If you start making retrospective changes, what sort of precedent does that set?

    Should smoking become illegal, do you suggest we imprison everyone who smoked in the 5 years before the ban? I am all for changing the remunerative structures but please can we limit the discussion to sensible ideas!

  • Comment number 45.

    "The justification is that they're cleaning up a mess created by others"

    "No, mush - the justification is that if you don't clean up what your fellow financiers have left behind, market forces will prevail, your company sinks and you don't have a job. That's the way it works in post-1980 Britain. Now get your hindquarters into gear and do it."

    Or at least - that's how it has worked in the rest of the commercial world for the last twenty years or so. That's the advice (albeit in more muted language) that their predecessors have given to the world as companies have been squeezed more and more.

    Forget the departed "others". Unless they can be shown to have willfully committed fraud then both they and their ill-gotten gains are almost certainly beyond legal recovery.

    However, for the rumps of their respective organisations, now being kept out of the brown stuff by the long-suffering taxpayer, executive renumeration must be consistent with their role as bankrupts and penitents. Otherwise let the whole rotten rump fail and hand its future adminsitration to a £35K a year civil servant somewhere in Whitehall. While we might lose the "expertise" and "business acumen" of the bankers (both shown to have been smoke and mirrors in recent years) we would at least get honesty, transparancy and objectivity

  • Comment number 46.

    2. At 10:29am on 04 Feb 2009, truths33k3r wrote:

    This is exactly why governments should never be involved in private business.

    The bailouts should never have happened due to the moral hazard it creates.

    One can only guess at the global level of fraud that has gone on for the taxpayer to fund.

    Quite right. Why on earth are we all allowing this madness to continue? If we don't vote this gang of corrupt, incomptenet spivs out at the first opportunity we will deserve all we get!

    Frankly, as one who has been a stranger all his life to strikes and civil disobedience etc, I am surprised to discover that I am so angry that I look forward to an opportunity to physically vent my spleen.

  • Comment number 47.

    If they are nationalised - they won't be profitable for at least ten years! No one will want the jobs from the real banking sector!

    We will have to have real captains of industry leading the banks and when they have recovered the 'pseudo CEO boys' might start to sniff around again!

    Until then they will all diversify into oil and health industries until the dust settles!

  • Comment number 48.

    Obama has got it bang on.
    Its about time that we did the same. I would actually go further and treat bankers that have taken risks to fuel their salaries, like organised crime bosses-prosecute them and asset strip them to help pay for the damage they have caused.

    After all we prosecute crime bosses not so much for the crime but for the instability they bring to country and their immoral earnings- sound famailiar?

  • Comment number 49.

    "The justification is that they're cleaning up a mess created by others"

    OK, then let them get their salaries and bonuses from the bonuses received, over the last 10 years, by those that got their businesses, the societies, the countries, the world, into such a mess.

    To be entrusted with responsibilities over the welfare of many people or a society should be considered a rare privilege and honour, not opportunity for boosting egos, self-flattery and chance to fatup bank balances. For £250,000, there are probably many people who are willing and able to do a better job, with integrity, diligence and humbleness. I can recommend our milkman and an old carpenter.

    Bonuses, if any, must be closely tied to the well-being of the country (GDP, debt/credit, employment, crime rates etc), a broad performance of the business (not just profits), and the taxes paid (low tax, low bonus).

    The stop short-termism grab and run. The calculations must be based a much longer period of say, 5 past years so they care about what has been done, the current year and future 15 years long enough for misdeeds and incompetency to come to light. Tax deductable and payable in installments.

    Get rich, of course, but slowly and responsibly.

    The bonuses for the general public can be made in the form of tax rebates using set formulae lest it be used for party politics.

    What Obama has done and propose to do in his two weeks in office makes our politicians and "leaders" look like self-congratulatiing, incompetent, arrogant wimps at best - unable and unwilling to quickly and effectivly tackle those who has offered them vain-glories while in politics, and winks and nods hinting at 13 silver pieces to come after politics.

  • Comment number 50.

    Most of us would regard $500k as an extremely generous annual salary. Surely running a bank cannot be such a rare skill that it is impossible to find someone of sufficient ability who would be delighted to do the job for much less.

    I very much doubt if the knowledge and skill required is even comparable with that required to be a scientist, mathematician, doctor, lawyer or a member of most other professions.

    Is it not time that someone looked into how these people got their jobs? So few of them were even clever enough to realise that when the credit driven asset price bubble burst, as it was bound to do eventually, their banks would suffer catastrophic losses.

  • Comment number 51.

    Would love to agree to this cap, but it is a nonsense to have a basis of the pm's pay being c£175k or the president's being £250k.

    Tony Blair i understands received £5m for his memoirs, £2m advise to JP morgan, c£2m pa other consultancy and £1.2m pa on the lecture circiut.

    To be fair i have always argued that bonuses should be paid for qualitative performance, not irresponsible gambles on short term profit.

    Pay should be fair for all, albeit that i would want to reduce the ego element of salary i.e. the escalating spiral effect of we should pay our boy a little more than the competition to attract the best.

    As a reasonable person what i would like to see is hard action taken against those who have been irresponsible and downright criminal.

    where are the high profile investigations and prosecutions?

  • Comment number 52.

    in the present climate global requirement for top executives must have reduced

    execs would find it difficult to find a job elsewhere paying the obscene rates they have come to expect

    should we not now be calling the shots

    if you don't like it - leave

  • Comment number 53.

    We are truly in an insane world where some business and finance leaders can be "pegged" at a salary level that some football players earn a month whilst people we rely on to keep us alive, teach our kids and feed us can expect a tiny fraction of the same.

  • Comment number 54.

    #9 RE 'screwing up'

    Obama can cover 10 days of 'screwing up' in one sentence.

    GB would be reading from an encyclopeadic set of prompt notes!!

  • Comment number 55.

    The conventional wisdom used to be that the market dictated the size of the salaries.

    That is, that the apologists might say that we have to pay this rate because these wonderful individuals may go elsewhere.

    In the actual event of global collapse this argument no longer stands up.

    So when the global market collapsed should the salaries not have done the same? Or, are we talking about a differnt market here?

  • Comment number 56.

    Just how much actual gold does our cental bank actually have ?, has anyone counted it lately

  • Comment number 57.

    Bankerrs should retrospectively get pay ,pensions with bonus Made with their toxic pie in the sty,then their AAA's holes should be converted to legal tender with 666 of the beast branding irons and dropped by helicoptricks Bernanke onto the nearest tridents to decomission them with a golden goodbye .

    They can then waddle away like little mutant pongwins .

  • Comment number 58.

    Indeed, Robert, bring back public duty.

    One can only be in one place at any one time, wear one set of clothes at any one time, sleep in one bed at any one time, eat one meal at any one time and so on. Anything more is a luxury or gluttony.

    So why are there some who aspire to more?

    William Blake said that you would not know satisfaction until you had more than enough. I agree but once you have satisfaction why want more? It is pointless: enough is enough!

    A bonus culture distorts business and the economy. Nobody is any the wiser as a consequence.

    Nobody now standing in the ruin of our economy can argue that highly paid executives are talented. Their only measure ever was their high pay. To justify it they told everyone they were talented. Now we know better; there is no measure between pay and talent.

    I must declare an interest. I will confess to being both an egalitarian and an economic puritan. If there wasn't a state I could even be a socialist.

  • Comment number 59.

    The only talent these bonus grabbing 21st
    century robber barons have is their amazing
    ability to lie cheat and swindle and get away scot free with their ill-gotten gains. Time to bring back the Stocks - a suitable punishment for the 'robbery and perjury' perpetrated by these
    criminals. Three days of humiliation "at the mercy of the public" should be more than enough to teach them the error of their ways -
    and it would be therapeutic for their victims to
    watch them being pelted by the public with rotten vegetables and other suitable missiles.

  • Comment number 60.


    Re: windfall taxes I'll repeat a post I made a couple of days ago:

    1) Who are the "city workers" you are talking about? Board members, senior management, traders, stockbrokers, mortgage advisers, back office clerks, where do you draw the line? It's a ridiculous catch-all term.

    2) Do you really think that all of the money paid to these individuals over the last 10 years has been salted away, or is it just possible that a lot of it was recycled into the economy?

    3) Are you willing to pay back the money you have earned over the last ten years as a result of being the car salesman that sold the city worker a nice Porsche, or the waiter in the top-class restaurant who only had a job because the city workers used to pay the extortionate prices there, or the architect who designed new offices for the city workers, or the builder who built them, or the person who made money in buy-to lets because the city worker was willing (legally) to lend him money, or indeed the person who made money on selling their house during the house price bubble allegedly caused by those city workers?

    4) If not, why not? You have profited from the money the city workers have put back into the economy, you should also share the pain.

    5) Do you think that it's just possible that you might concede that things are a little more complicated than they appear to be in your blinkered view of the world?

  • Comment number 61.

    The world's economies are due for a major realignment. It isn't clear whether or not the atmospheric climate has reached a tipping point yet but there's no doubt the economic climate has and it's fallen off a cliff. In the end, old foolish debt which never should have been granted in the first place including loans to any and all individuals who walked through the door to buy houses, advance credit on plastic, loans to nations who spend far more than they take in, loans to banks who are insolvent, loans to companies that are bad credit risks, investments in complex intstruments that were made deliberately incomprehensible to disguise their risk and circumvent laws which restricted who could buy them will be wiped out, erased. This will not come by any law or court judgement but by inflation, the printing of vast sums of money to pay them off with cheap new found cash. It's every lender's worst nightmare and every borrower's dream come true. It is the only way out of the current mess because there aren't enough available tax revenues or other private cash in the world to begin to pay for what has been borrowed. In the new world where a cup of coffee at Starbucks may be $25 and the guy who serves hamburgers at MacDonalds may earn $80,000 credit will be advanced only on the likely ability to pay and at rates that give reasonable return on a loan while being completely transparent. Borrower and lender will know the exact terms. Nations and people who lived far beyond their means will have to change their expectations and life style. Companies that don't show profits based on sound open accounting practices will have their share prices suffer, and if uncorrected will go broke. Those who circumvent this transparency will be prosecuted and sent to prison for fraud. But before this happens, in the period of resistance to this process due to denial and unwillingness to change, we will have to suffer a very bad depression.

    Europe, your cradle to grave guarantees and social safety nets are at an end. Produce competitively or learn to live like the third world does.

    America, your lavish spending on every whim your bank credit cards will cover is over.

    China, start developing your own country and stop trying to live off of the recklessness of others.

    Russia, you can't exist on letting people pump oil and gas out of your ground, learn to make something useful the world wants or go broke again.

    Third world, stop depending on charity of others, the donors' cupboards are bare. Get rid of your corrupt wasteful governments and your foolish cruel wars or starve to death.

  • Comment number 62.

    I do not support to limit salaries of people now - we still live in market economy, not socialist one. Let market decide.

    However, bonuses should be given only to people who do outstanding work or/and achieve very good result.

    What I support is to make people who made bad decisions and who brought us into the mess (not just top level) to return their past bonuses. They should be ashamed of putting whole country into the hardhip and get millions of GBP for this.

  • Comment number 63.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 64.

    As someone who has seen bankers idiocy at first hand over the past few years - I am an equity investor in privately owned sub-£50m turnover companies - where banks have priced equity risk as debt. I have to say that I am enjoying seeing bankers become the most disliked set of people in this country.

    But, there are a number of issues that people have to consider.

    1) The majority of bankers are fairly sensible, hard working and don't earn a fantastic amount.

    2)That shareholders in banks should not be looking for returns in excess of that of a utility. We need to get banking to be boring, with unsexy returns, as it should be a defensive sector, that pays a steady dividend, and no more.

    3) Investment banking should be seperated from the rest of banking activities. Whilst high street banks should be able to use the services of an invetsment bank for fundraising, they should not be buying and holding investments dreamt up by some whizz kid invetsment banker.

    4) The senior executives of RBS should be held to account for bypassing normal credit committee when sanctioning lending to Russian oligarchs - who are now cash strapped billionaires. Fred the Shred should be charged with misleading shareholders for the fundraising prior to Govt intervention, and as RBS could be said to have been trading whilst insolvent, he could be prosecuted.

    5) RBS should immediately stop treating their business support operation as a profit centre. They are the only bank that deliberatley tries to maximise their profits from business customers that are struggling, by charging massive monitoring fees, facility fees, and charging usury interets margins. Not only do they ensure that businesses fail, but they also worsen the position for trade creditors. Having recently been on the end of RBS trying to take an equity position in a company I have an invetsment in, in return for maintaining the overdraft facility (we rebanked to another wth a much enhanced facility), I will no longer allow any company I am investing in to use RBS for any service.

    6) The cosy relationship between banks and insolvency practitioners needs to be reassessed, as well as the costs of IP's which are daylight robbery - effectively destroying any value that trade creditors might have expected.

    7) The Basle II accord needs to be ripped up. Instead of forcing banks to put more capital aside during a downturn, they should be forced to do it during the boom, thereby taking the wind out of the sales of the economy in a more controlled manner before a banking issue develops.

    Whilst executive pay is something that all SHAREHOLDERS be concerned with, you have to remember that Flash has benefitted to the tune of 41% of every bonus paid, a revenue stream he has become hooked on.

    I do think, however, that it is time that instituitional shareholders in all companies should start kicking back on executive remuneation, and vote against excess. For privately held companies where the doers and the owners are one and the same, they should be able to pay themselves what they want - they do carry the risk etc.

  • Comment number 65.

    splendid news from the usa, lets hope brown and his shower do the same.

  • Comment number 66.

    #42 has a point:

    The UK can sponsor a UN resolution to invade Liechenstein and Monaco on the grounds that they may possibly contribute to state sponsored terrorism and their contribution to global econcomic depression due to the lack of transparency in their dealings.
    We can even add the intention to promote democracy and over turn their quasi-non-democratic forms of governments to justify our actions.
    For at least the 2 days required to subdue the resistance the headlines will rung out the victory and the general economic problems will just disappear into a hole in the sand.
    After that we will have to find a flaw in the Swiss democratic process, or make one up.

  • Comment number 67.

    I thought you were only rewarded with high salaries and bonuses if you were good at your job. These bankers were definitely no good at theirs i.e. the mess they got us all in. Most of them are friends of our politicians so I cannot see a curb put on their salaries or bonuses. Off the point Robert why don't you have a look at the UK mortgage companies that are a spin off from Lehman Brothers as I understand they are being sold in a fire sale so the people with mortgages will not know who owns them and the financial institutions buying these mortgages will not want to wait 25 years for their money.

  • Comment number 68.

    Yet the mantra continues to be that if not properly remunerated good staff will go elsewhere. This is what I am hearing from UBS staff taking a huge cut to bonusses. They will just leave. They seem to think there will be somewhere for them to go (if they are good enough) that will continue to pay the big bucks (or pounds).
    There seems to be no recognition that significant and long term wage deflation needs to take place within financial services.
    As a tax payer and middle class Londoner long made to feel poor despite a 6 figure income I feel sure that finance must face a reckoning and that a 50% reduction over the medium term must happen. Or am I being fanciful? If the big bosses get £350k where does the rest of the pack end up?

  • Comment number 69.

    It's incredible how many people here are whining about bankers' remuneration, yet will quite happily go to a football game this weekend to support people who are being paid far more than bankers just to play a game.

  • Comment number 70.

    Without offering world class salaries and bonuses to our business leaders, we will not be able to attract the quality of executive that we have now.

    Similarly, if we continue to criticize the actions taken by our elected officials and overexamine such things as their expense accounts, then we will not be able to attract the quality of politician that we have now.

    Hang on a minute, I think that I might be onto something here.....

  • Comment number 71.

    Well noted #8 cityNickDrew

    Also of note:

    Merrill Lynch: John Thain, the former chief executive of Merrill Lynch, the investment bank now owned by Bank of America, has been subpoenaed as part of an investigation into bonuses paid by banks that have received US governement bailout funds.

    AIG: Christian Milton, a former executive at the US insurance group has been sentenced to four years in prison for his role in a reinsurance deal that prosecutors said had misled AIG investors.


  • Comment number 72.

    A good idea from Obama, if the only reason the business still exists is a state handout then it is clear that renumeration has to reflect this simple fact.

    Gordon, one policy idea from someone else you can nick that no one will object to.
    350,000 quid is more than enough for anyone.

    It is a real shame that already distributed bonuses based on overblown notional profits cannot be recovered.
    You can recover the proceeds of crime but unfortunately not stupidity. And being stupid is not a crime.

  • Comment number 73.

    How much do we pay other heads of public owned institutions that regularly lose money, e.g. the post office. Maybe their salary should be reduced a bit too.

  • Comment number 74.

    Someone once told me that Bankers are people who are obsessed with money who are not clever enough to pass either the Accountancy or Law exams.

    I do not know if this is true but makes you think................................

    However it may be this is your local bank manager - I suspect the ones that are being 'hunted' for are probably qualified accountants anyway - for all the rights and wrongs of what they did and what has happened banking at the highest level has got phenomenally complicated - which, of course, is the whole problem now.

  • Comment number 75.

    Who said our bankerrs were not tallonted,

    They were certainly more skillfull than the Brinksmat Robbers which established the bench mark remuneration scales for skilled opperatives .

    As for those who accuse the bankerrs of "ransacking and pillageing" thats a damnable lie!!!!

    No one saw any ransacking .....just a deccade of quiet pillageing, as they wheeled their performance bonuses out the front door ,under the watchful gaze of the shareholders [hidden in full view]

  • Comment number 76.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 77.

    13.26: Just heard on "World at One" that the solution to the Lincolnshire strike is to "create" another 100 or so "new" jobs.

    So we won't upset the Portugese workers - and have offered enough of a sop to the strikers. No jobsworths they.

    The offer's been accepted. Why wouldn't it be? With the billions being thrown into all the other black holes, what's another 100 sinecures? After all, it's only taxpayer's money.

    Please, can I wake up!

  • Comment number 78.

    #51 Kudospeter writes:

    'Tony Blair i understands received ?5m for his memoirs, ?2m advise to JP morgan, c?2m pa other consultancy and ?1.2m pa on the lecture circiut.'


    But wait - you forgot about his role as special envoy to the Middle East, doesn't he get paid for that - after all he's been doing such a wonderful job recently.


  • Comment number 79.

    Gordon Brown take note.

  • Comment number 80.


    Prescient I fear

  • Comment number 81.

    #42 - excellent idea. This would raise billions. It could be done by co-ordinated action without the need for the military. Unfortunately they would be tipped-off by some of the politicos with 'investments' in said tax-havens.

    Yes, Barclays only escaped the fate of the Pride of Loch Lomond by the width of a CDO squared. It says a lot about the quality of the senior management at Barclays Bank, even though they present themselves as having escaped the worst though 'good judgement'

    By the way, note the hilarious comments of Onward-Ho (probably changed handle now) a true Zanu-Nulabour acolyte in disguise.

  • Comment number 82.

    Hello all, your friendly hedge fund rich kid here! Before you nail me to the stake, bludgeon me with your pitchforks and feed me to the fishes, perhaps you will allow me my 15 minutes of fame before I go back to my online shopping order with Prada.

    Like many, Peston’s blog has become vital lunchtime reading. I’m compelled to comment today, as in the last couple of weeks we've all resorted to militant socialist ranting! Come on, we can do better than this! You vilify the banks and the politicians because they are the easy targets.

    Home truth #1 - None of you moaned when your buy to let flats were printing you money, but none of you accepted the simple fact that the value of your investments could go down as well as up. Lesson 1 - If you can't afford to take the hit, then don't place a bet.

    Home truth #2 - None of you moaned when your pension pots were inflated by a bull market….But , guess what, none of you can now believe that the value of your investments could go down as well as up?? Lesson 2 - Understand the risk of your investments and don't feign ignorance in your defence!

    Home Truth # 3 - We will have a deep recession. More banks will fail. More of us will lose our jobs. It will be painful but sooner or later we will reach capitulation and the market will turn as assets become good value again…Hey presto, the jobs market will come back. Lesson 3 - The government does not owe you a job and we have to get into a more self-sufficient mentality.

    Bank’s are being supported by the government because there will be a systematic failure if they do not do so during this liquidity crisis. Some of them will survive, some more will fail. But the banks were always going to be the most exposed to the deleveraging of the credit markets because they ARE the markets! Perhaps spare a thought for the 99.99% of bank employees who work very hard, are paid well, but not excessively, and did not have any involvement in today's global turmoil

    The success of the British Government will be in its ability to reposition the UK for growth when the "green shoots" do actually appear. 5 areas to watch...

    1) We need a sensible and balanced regulatory framework across global Financial Services, but for God’s sake don’t smother the free markets with unenforceable controls.

    2) Capping executive pay…. Lip service by politicians. This will be self imposed and the answers lie in sensible linking of remuneration with medium-long term results. Already the investment banks are realigning around this model – Ask anyone at Deutsche Bank and UBS how their pay package has been changed over recent months if you think this won't actually happen across the City in the next 2 years

    3) An investment in sustainable and profitable technologies. Who knows where future growth will be, but backing and aligning Britsh workers into “green” technologies which promote UK self sufficiency and a clear investment strategy in scientific and technological innovation will probably win out over arguments on the picket line.

    4) Sensible investment in UK manufacturing. The UK can do it well. Take Nissan in Sunderland and Honda in Swindon and work out why that model works (and note also that even these highly successful companies needs to pair back operations when they are under market constraints!).

    4)The realisation that public sector needs to deleverage as well as the private sector and that this HAS to be combined with genuine public sector reform and absolute accountability of all ££’s expenditure to all people who contribute to the UK bottom line.

    5) The introduction of a proper long term public services strategy which is taken out of the political agenda. A 20 year vision for Education, welfare and Healthcare which transcends all political parties

    I’ve no idea how points 4 and 5 could be implemented in practice without significant political reform… But here’s to hoping!

    And finally, just to stoke the fire a little more… Post 27 - the majority of city workers have already paid 40% on their bonuses…. Where has that gone… Ah yes, right into guaranteed public sector retirement plan, no doubt… ha ha

    Keep up the debate all!

  • Comment number 83.

    60 Rupert Tarquinson:

    Pheeeweee Rupert. Relax, have a drink, sit down maybe take a power nap.

  • Comment number 84.

    Not half as much as after the International is released to remind us all of the details of BCCI. How many UK banks is it that are now on the Fed hitlist for behaving similarly, does anyone know?

  • Comment number 85.

    Executive pay inflation is created by publishing the numbers. This just results in proliferation as egos battle to out-do each other. If it were a private matter, then executives would not compete to demonstrate who earns the most...instead, their performance could be measured by traditional means...profit and share price!

  • Comment number 86.

    The real worry is that the recession has struck and we are realising that in rich countries the majority of people actually have enough stuff...there is no scope for boosting the economy by building cars and TVs because the ones we have last a long time and the technological advances on new models are small and peripheral ( ie do very little to increase their utility or our pride of ownership). The only scope in these countries is to greatly increase wealth creation by creating goods and services for all of us: infrastructure, health, education, novel energy sources etc. Three months into this crisis I would like to see evidence that we are starting to shift the economy in these directions. We should be running out of patience with the existing banks and recast them in a form which will do the job we now need them to do.

  • Comment number 87.

    Hmm, lets see, just how many Public Sector employees earn over 100 000 pounds.

    Hmm, so how many earn over 20 000 pounds ?

    Ah so the majority actually earn around 22 000, with many actually on far less.

    By all means cap their Pay at 340 000 pounds !

    To help get them there, how about a nice thirty percent pay rise to inject some money into the economy ?

  • Comment number 88.

    Hmm, now how many Politicians and Bankers have numbered Swiss Accounts ?

    Now there's a little project for someone.......

  • Comment number 89.

    Obama may have the guts to say what he likes about 'bonus schmes' - but will he be able to pull it off? Methinks that he will soon find out that he does not, in fact, run America. It's business that runs America and us for that matter. I wish it were otherwise but it's not.

    We can howl all we like about 'bonuses' but nothing will happen to alter how CEO's etc., earn their living, and it is 'who you know' and 'where you've come from' that keeps them in their jobs.

    At #3 supercalmdown - yes, probably it will be only the Supermarkets and essential goods that will prevail.

  • Comment number 90.

    Of course govts can fix the salaries of people they employ and if they want to restrict salaries in businesses they rescue that is their right - private equity does the same when they buy companies. Whether you end up with the right quality of staff, fully motivated is the issue.

    As for the poster who suggested invading tax havens perhaps you would like to suggest a definition of a tax haven - please do not start from the tax rates because that shows ignorance. If a country raises enough in tax to pay for its govt spending then why is it a tax haven? It is living within its means (unlike UK) the choice of how to raise tax be it corporate rates, personal tax rates, VAT etc is for each govt to make. Classic example is the Channel Islands. You label them tax havens because they do not levy corporation tax but they balance their budget rather better than UK

  • Comment number 91.

    No 53 - ShockLeader

    No, it's not insane at all. Footballers are paid these obscene sums because they are assessed to be the best in their field by the managers and directors whose objective is to put together a silverware-winning team. These teams are financed - directly and indirectly - by punters who gain vicarious pleasure when the team with which they identify eventually lands the said silverware.

    If these punters send back their Sky receivers, stop going to games on Saturdays and stop buying overpriced replica strips then the whole financial edifice collapses and the obscene salaries diminish. However there are no credible signs of it so far and the punters continue to willingly pay monies they can possibly ill-afford just to enhance their prospects of having bragging rights at work on Monday morning.

    There is no such parallel with the current heads of the City's sick, lame and lazy. Beyond the security of his modest savings, the Man in the Kings Head seems to have little sympathy for the current management of NR, HBOS, RBS and the rest and whether they are being paid what their industry perceives to be the market rate. He just knows that he's not prepared to have it deducted from his pay packet.

  • Comment number 92.

    Bonuses are a lousy way of renumerating people, whatever the level in the company.

    I have worked as a consultant to the financial services industry (investment banks) for over 20 years and the whold industry is bonus driven from top to bottom. I have come across situations on several occasions where bonuses act directly against a companies interest. The general problem is that issues that are very expensive in the long run are not raised early for fear that they will affect bonuses. Frequently we have seen computer systems go in on time (triggering bonuses) that are fault ridden and cost a company far more in the long run then they should.

    We always try to resist bonus arrangements when agreeing contracts. Instead, we set a fee for a job and do the best we can to deliver. We always try to do the very best job that we can in the best interests of the client and do not need the promise of a bonus, or the threat of not getting a bonus, to motivate us.

  • Comment number 93.

    I'm with #29 and #59: the idea that the sort of people who were in senior positions in the banks that have got us all into such a mess had any sort of "talent", other than for feathering their own nests, would be laughable if it hadn't had such tragic consequences.

    I actually have no problem with stratospheric bonuses for senior executives if they do a good job. But the word "if" in that sentence is crucial.

  • Comment number 94.


    " Dear BBC Blog contributor,

    Thank you for contributing to a BBC Blog. Unfortunately we've had to remove your content below

    Your posting appears to be off-topic, in that it does not appear to relate to the subject of this blog.....

    The BBC Blog Team
    Obama biffs bonuses

    Off topic??? See emphasised below!
    For Helenhey (33)

    Salaam, etc.
    When the Tao is present in the universe,
    The horses haul manure.
    When the Tao is absent from the universe,
    War horses are bred outside the city.

    There is no greater sin than desire,
    No greater curse than discontent,
    No greater misfortune than wanting something for oneself.
    Therefore he who knows that enough is enough will always have enough.
    Lao Tzu ~450BCE

    Couldn't be more on-topic!
  • Comment number 95.

    Just speaking to post 5 by pdnash, post 38 ; Anthony-analyst's and alos post 44 3671276 (and many others)

    I don't think (re 5) there will be a downward ratchet..these guys NEVER were worth £5Million plus bonus/option/pension each year of £14Million or whatever.... I think other "CEOs" and Directors in many sectors may see their own inflated (though much less so) salaries suddenly hit a wall as the very high peaks inBanking etc disappear (Greed is greed...and will look REALLY greedy at the top now the bublle has been pricked)

    I don't think post 38 is right...though I see why he's saying it..but Google, You Tube (now Google owned) , Ebay, Amazon etc etc are massive 'game changer' companies that have been created by entrepreneurs (albeit often with a few million dollars of seed capital I have to admit) in less than a generation...let alone Microsoft, Dell ... and so on.

    Finally regarding the point in post 44... he is 100% right that laws can't be retrospective but in many ways the issues are simply 'time frame ones'...IF a CEO was to get a bonus for performance acheivements A-E but ONE day later it was found that there had been a material fault in the calculation and performance acheivement D was simply false..he wouldn't get the bonus.

    Here they have been given bonuses for creating "sharehodler value" that is always the metric, whether overt or hidden behind technical spec.... and patently, obviously, and spectacularly they haven't provided shareholder value....not at Northern Rock...or HBOS...or RBS or ...well.....just about all of them.

    It's a bit like the " negligent or just incompetent' argument (---in this version either these people were all admittedly living in a bubble where in that year they thought at the year end they HAD delivered whatever shareholder value justified the bonuses (and flights to Barbados for jollies etc) ...but unfortunately within a supportable time frame (sometimes even before the actual year end) the company had ceased to exist totally, or spectacularly combusted and reduced to virtual zero their innocent assumptions were wrong and the bonuses paid in error.

    OR (and probably worse) they took bonuses knowing the whole edifice was tottering and could collapse at any moment...that's possibly one for the courts.

    Basically who is to blame...the person who builds the ramshackle tower block knowing two dorrs slamming at the same time MIGHT bring it all down?....or the two people who happen to slam their front doors simultaneously?

    I think that's the counter argument to the retrospective calling to account--- basically what day are we to choose as the moment to divide retrospective from current.... ???

    The day Northern Rock's finance officer left in early 2007?...or whenever the Govt finally gets round to enacting some legislation in 20whenever???...or some other date?

  • Comment number 96.


    At least Gordon Brown is still helping the hard pressed bankers (er sorry families)

  • Comment number 97.

    Geoff (70),

    "Without offering world class salaries and bonuses to our business leaders, we will not be able to attract the quality of executive that we have now."
    And that would be a bad thing? ;-)
    As for the "benefits" gained from the "global market" in executives...

    Peace and knowing when enough is enough
  • Comment number 98.

    71. At 1:07pm on 04 Feb 2009, BankSlickerminustheR wrote:
    Well noted #8 cityNickDrew

    Also of note:

    Merrill Lynch: John Thain, the former chief executive of Merrill Lynch, the investment bank now owned by Bank of America, has been subpoenaed as part of an investigation into bonuses paid by banks that have received US governement bailout funds.

    AIG: Christian Milton, a former executive at the US insurance group has been sentenced to four years in prison for his role in a reinsurance deal that prosecutors said had misled AIG investors.


    There is a law for the RICH and a law for the POOR !!!

  • Comment number 99.

    So Gordon Brown has been waiting for Obama to take the lead in getting the world out of the mess it's in.

    Well he certainly won't like what he's hearing for it seems to be in complete contradiction to what he is advocating.

    Perhaps the US are realists and are fully aware of what they must do to protect their country and its people.

    If Gordon can't agree then he must go for he cannot save the global economy on his own if everyone else has given up on it.

  • Comment number 100.

    "Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalised, and the State will have to take the road which will eventually lead to communism"

    Karl Marx, Das Kapital, 1867


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