Apparently the directors of RBS are threatening to resign en masse if the government acts to prevent them paying huge bonuses to the "workers".
OK - bye then. Good luck finding a new job in Dubai or Saudi Arabia.
Let's just get one thing straight about this. The "workers" we are talking about here are not the clerks and cashiers that you or I meet in the branches up and down the country and earn something around the average national income. The ones in line to receive huge bonuses are highly paid already, have a large 5 bed family home in the suburbs, a holiday home in Cornwall and retain a flat in the City for the occasional overnighter with a mistress or a line of coke - or both.
It is claimed that they are owed big bonuses because they have made such a great profit this year. Whoopee! Hang on a minute though - weren't they making huge profits in previous years as well - by "investing" in dodgy unsustainable deals? How do we know that they aren't doing exactly the same again now - except they are now doing it with taxpayers money?
We don't - and they quite probably are. So, no - they shouldn't get big fat bonuses this year. However, I have no problem with their bonus being deferred until such a time when the company they work for has finally repaid the debt it owes to the taxpayer. About 30 years time or so.
The bosses argue that they are contractually obliged to pay these bonuses. More fool them. But they should point out to these people who awaiting their huge bonuses that the rules of the game have changed - and they can either lump it or leave. The other thing the bosses claim is that if they don't get their huge bonuses they may leave and Britain will lose "talent".
Look, financial institutions don't choose Britain as the base for their operations because we have a huge pool of talent. They choose Britain because our legal and financial systems are such that they can operate pretty much how they like - something they can not do in other countries. The "talent" might leave, but where are they going to go? Unless they all have a hidden talent for speaking Mandarin then I think their options are pretty limited.
Finally, although I'm not usually given for government interfering in the way private businesses operate, I think there is a case for a restriction on the bonus culture. A simple law restricting any annual bonus to a maximum of 10 or 20% of a person's annual salary is all that is needed. I think that is more than fair and perfectly reasonable.
3 comments:
In my time, bonuses were awarded for achievement over and above the norm, not for just doing (or failing to do) your job. John Lewis staff, for example, get a bonus based on the company's profits for the past year. I just can't understand why bankers should get a bonus for failure. And surely a "guaranteed bonus" is an oxymoron, the only guarantee that is surely possible is a guarantee that it will be paid if certain criteria is met in the same manner that you are guaranteed a salary for your work.
But these payments don't appear to be bonuses, they are merely part of the annual salary paid in a lump sum probably to keep the average company salary at a reasonable level.
Yup, Dubai would suit them nicely. Maybe we could convert their bonuses into air fares?
I think the bonuses issue is a bit of a red herring. If the shareholders agree to the bonuses, then it's fair play. Whatever the shareholders agree to in bonuses only lowers the dividend paid to the shareholders - so the shareholders ought only to agree to bonuses when the profits are available to pay them.
Now in cases like RBS where the government is also a shareholder, then I think the government is perfectly entitled to have a say in bonus payments. Where the government isn't a shareholder, it should be up to the banks themselves to pay what they like.
The real cause of the banking crisis was (at least not directly) silly bonuses, but reckless lending which started off when Bill Clinton's Democrats threatened to penalise banks who were not more 'inclusive' in their lending policies. In other words, banks were forced by the government to make these daft loans.
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