'Should bankers' bonuses be stopped?' poll discussion

stevemcol

I've no problem with bonuses. Banking bonuses are disproportionate though. Like many other people these investment bankers are just good at their job. It so happens that their job manufactures money, not widgets.

They should be reasonably rewarded. A decent salary to start with, then reasonable bonuses, perhaps up to 50% of salary. The bonus could be placed in a pension scheme, payable at say age 50+. The value of the scheme could go down as well as up over the employee's career, according to their long term performance.

stevemcol

MSE_Martin wrote: »

I must say I am surprised at the strength of the vote to ban bonuses - personally I have no issue with rewarding good performance and competitive pay -

Martin

Martin: Option D is worded
'Stop all big bonuses. The amount simply isn’t right.'

Most people don't have a problem with bonuses. It's your qualifier "big" and "The amount simply isn’t right."

So nobody has voted to stop bonuses. That option isn't in the list.

dawalker17uk

GIOL_Elmo wrote: »

I went for A but there needs to be something to control excessive risk and limiting bonuses is not it, the mindset is not bonuses for money's sake (after a certain point) it is bonuses as a competition and bragging rights. In this industry you measure yourself against your peers based on money whether that is annual profit, salary bonuses etc.

I am a banking myself and I would be much more in favour of legislation that controls for instance if the senior executive or a bank, or any other company, destroy the value of the company through excessive risk and found to be criminally neglegent then they are pursued by the law and are liable for lawsuits.

I'll through this out here to see what others think and I expect to be given a hard time for being a banker.

This just goes to show the state of play when a banker tries to make an argument for banking and can't even construct a sentence, never mind spell:
just to help you out mate:

negligent not neglegent
throw not through
and for the statement "I am a banking myself" makes no sense, try "I am in banking" or "I am a banker". but when you say the last one pull you're cheeks apart.:rotfl:

Keeley_p_2

I have to say, I'm in two minds over this. My OH works for RBS, and he's been told that he isn't getting his bonus this year. He's not one of the big cheeses, just a cashier. He's hit all his targets all year, and generally is known in his branch for being someone the customers go to when they need help. Yes, he's still getting his salary, but then so are the people who just show up, clock watch and don't put anywhere neat as much effort in as he does.

On the other hand, I work for the govt (we're a popular pair! lol) and we've never had bonuses, and now we aren't getting a pay rise for at least the next two years, which is mainly because the govt's skint.

So I can see both sides of the arguement. I think that bonuses should carry on, but only if they are deserved, and certainly should not be thought of as a right.

dave2

I think few people seem to understand anything about the City.

Crying about "I never got a bonus it's so unfair!!!11one" shows ignorance of the situation - say your boss approaches you and offers you a new package where you get half your salary but as long as you make targets you get a 100% bonus.

Would you take it?

Top traders do not get paid a fraction of what they're worth through their salary, it comes through their bonuses. Down the chain you have people like Keeley_p's OH where the "bonus" is more obviously just their salary with strings attached.

Sure the bonuses in the paper are all outrageously lush but it's a newspaper, the reasonable ones aren't worth printing. Even then most of the extremely high bonuses are simply reflective of what they're making their employer. These guys work 6am - 8pm and retire at 45 because mentally and physically they're 65. They maybe make £1m after bonuses but made their employer £20m.

Sure there's good arguments for improving the bonus structure, for example rewarding longer term performance (djhworld makes some good points a few posts up from this one), though note generally bonuses are calculated annually. Well before the crash the issue of director's remuneration was a hot topic here in the world of accountancy/corporate governance since they can basically set their own package at whatever they think is just enough to avoid a shareholder revolt.

But the bast majority of the outrage out there is about how big the bonuses are. It's outrage fuelled by a combination of ignorance, jealousy and a need for there to be a bad guy and "something to be done".

All that's going to happen is:
a) these guys get paid the same amount but a higher proportion is salary, or
b) they are smart guys who get around the rules and it's just a bunch more red tape for the rest of us, or
c) they up sticks and make their money for an American bank paying American taxes

FWIW the biggest cause of the crash, to grossly oversimplify, was due to everybody using the same risk model for these very complicated packaged derivatives. The model assumed the market was reasonably efficient but this assumption failed because everybody was using the same model.

Lo and behold some banks (not individuals bankers, banks) are found to be trading packaged derivatives that arent worth anything (the so called toxic debts) and the first round of institutions fail catastrophically. The market realises their mistake and the stock market crashes. Banks realise that they have no idea how much of this toxic debt the other banks are holding and so simply stop lending to each other.

While individual risk-taking did not help, it did not cause this crash. It was a fundamental structuring error caused by entire organisations not really knowing what they were doing and a total failure of governments and regulators to realise and intervene. Notice that Freddie Mac and Fannie May (the Fs stand for Federal, btw) had an A1 credit rating in September 2008, turning to junk overnight.


ps. I'm not nor are connected to a banker (or anybody wealthy) and my £100 xmas bonus (heh) has been cancelled this year

pps. it's unwise to criticise grammar on the internet since there's a decent chance they'll turn round and challenge your Spanish (or whatever their native tongue is).

MissLead

meher wrote: »

The act that needs controlling is of the greedy among the consumers who want to borrow money from banks, which they cannot actually afford to. There are many people who love to live off the state and/or off others, utterly shamelessly, borrowing several times more than their salary for the ownership and enjoyment of things that bear little reflection of who they are, rather of who they want to be. When they don't get what they seek out or fail to fulfil contractual obligations, they get jealous and make the business community that churn the wealth that they yearn for, the scapegoats of every blessed crisis and try to cripple it. I'd say refuse custom to those who cannot afford to, as a start and then work upwards in the hierarchy to cast the blame.

Wasn't it financial institutions lending money to precisely the people mentioned in your last paragraph one of the largest contributions towards the crash in world finances, i.e. 'sub prime mortgages' Had the industry carried out normal due diligence on borrowers and on the underlying asset, the crisis could have been avoided - but obviously they didn't so you can hardly lay all the blame on the door of the borrowers can you. There are rules and regulations in place regarding mortgages and a dunce would surely understand that there are consequences for breaking the rules!!! Lending more than the value of a property to someone who clearly doesn't have the financial means to support such a mortgage is to me unbelievably poor business and the people who did so deserve to lose their jobs rather than earn a bonus as a reward for bringing the banking world to its knees!

Try laying the blame where it truly belongs! The people you describe are not the only ones decrying the finance industry. Believe me there are many more ordinary people like me who are actually now paying for the greed of investment bankers and we have every criticise them! Just how many heads have rolled because of abysmally poor investment choices?

Vlasko

MissLead wrote: »

Wasn't it financial institutions lending money to precisely the people mentioned in your last paragraph one of the largest contributions towards the crash in world finances, i.e. 'sub prime mortgages' Had the industry carried out normal due diligence on borrowers and on the underlying asset, the crisis could have been avoided - but obviously they didn't so you can hardly lay all the blame on the door of the borrowers can you. There are rules and regulations in place regarding mortgages and a dunce would surely understand that there are consequences for breaking the rules!!! Lending more than the value of a property to someone who clearly doesn't have the financial means to support such a mortgage is to me unbelievably poor business and the people who did so deserve to lose their jobs rather than earn a bonus as a reward for bringing the banking world to its knees!

Try laying the blame where it truly belongs! The people you describe are not the only ones decrying the finance industry. Believe me there are many more ordinary people like me who are actually now paying for the greed of investment bankers and we have every criticise them! Just how many heads have rolled because of abysmally poor investment choices?

Why don't you ask the right question here ? Question being: Why did people with no jobs, no money and no assets wanted mortgages ? Did banker take a gun, pointed it at that "poor" fellow and forced him/her to sign the contract ? No, people did it because they wanted it. They wanted a house they could not afford. All just because they heard that, they must get on the property ladder, that they should not pay landlord's mortgage and this sort of rubbish. Greed and jealousy was their problem. And the worst thing is that they were bailed out(repossession rules changed, forcing banks to lend.....) and people, who are prudent with their finances, are paying the for the bailout.

cwep2

The UK Tax System:

Suppose that every day, ten men go out for beer and the bill for all ten comes to £100.

If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay £1.
The sixth would pay £3.
The seventh would pay £7.
The eighth would pay £12.
The ninth would pay £18.
The tenth man (the richest) would pay £59.

So, that's what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.

'Since you are all such good customers,' he said, 'I'm going to reduce the cost of your daily beers by £20.

Drinks for the ten now cost just £80.'The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers?

How could they divide the £20 windfall so that everyone would get his 'fair share?'

They realized that £20 divided by six is £3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay. And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid £2 instead of £3 (33%savings).
The seventh now pay £5 instead of £7 (28%savings).
The eighth now paid £9 instead of £12 (25% savings).
The ninth now paid £14 instead of £18 (22% savings).
The tenth now paid £49 instead of £59 (16% savings).

Each of the six was better off than before and the first four continued to drink for free, but once outside the restaurant, the men began to compare their savings.

"I only got a pound out of the £20," declared the sixth man. He pointed to the tenth man, "but he got £10!"
"Yeah, that's right," exclaimed the fifth man. "I only saved a pound, too. It's unfair that he got TEN times more than I!"
"That's true!!" shouted the seventh man. "Why should he get £10 back when I got only two? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"

The nine men surrounded the tenth and beat him up. The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something very important....

they didn't have enough money between all of them for even half of the bill!And that is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore.

The same could be said for the banking bonus culture, attack those who contribute the most tax to the system when the government is building up record deficits and the financial services industry will move out of the UK. We have been huge beneficiaries of the fact that London has been the most successful financial centre of Europe in the last two decades and with the rise in fortunes of the middle east (many of whose workers pay almost no tax) and the far east (tax rates in Singapore and Hong Kong are half that of the UK, less than that after the 50% tax comes in) there is a very real danger that we will see a brain drain out of the UK in the next 3-5 years. I know of several firms that are already planning on shifting many of their top talent out to Switzerland and the middle east as the job can be done almost anywhere now.

Most of the recommendations of the changes in how bonuses should be paid (a large proportion in stock, which is held for 2-3 years, and short term performance making up less than half of the criterion for measuring overall performance = bonus and keeping money in reserve in higher risk products which therefore doesn't show up in the profits for year 1) are sensible, and will be widely adopted - but many of the top banks have been using such models for the last 5 years anyway.

Ultimately anyone who can generate 10 or 100 million pounds to a company which otherwise would not have been made has a value and if your company does not employ them, someone else will. That argument is why top footballers are worth £80m and paid so highly - it is no different in finance. Of course the whole 'value' perception has changed and companies will be looking much more closely at how much of a paper profit is realised and how much is just theoretical - and how much risk is still left in the worst case scenario. Nothing legislative will change this fact which will mean banks have become more self regulating on pay anyway since the credit crisis. An over zealous, reactionary, tabloid friendly set of curbs on the pay structures (with one eye on the election next summer) will probably seal the fate of London's financial industry and leave everyone left footing an ever expanding bill.

Blacksheep1979

dawalker17uk wrote: »

and for the statement

and as for the statement ?

HarryKnights

GIOL_Elmo wrote: »

Part of the reason is that you trade off salary/bonus etc for perks.
How many days holiday do you get a year? I get 25 days leave + 8 statuatory holidays.
Whats your pension contribution and years to get full pension etc? I get 5% matched contribution, bare in mind final salary pensions cost between 15% and 20% of salary to fund.
How many unpaid hours of overtime do you do a week? I am contracted to do 35 and regularly do 60+ and have never had 1p in overtime since I left university in 2001.
Public sector also pay low skilled roles above what would be normal market rate. etc etc.

As soon as we can eradicate the terrible use of resources and massive inefficiencies in the public sector then I am happy for there to be bonuses paid. The current focus on banks and bonuses just highlights the socialist mess of this country where by a reasonably small percentage of the population support the entire country and are then demonised for earning a good salary/bonus etc.

I for one am of the opinion if things do not change I will not be in the UK in 5 years time and that is a similar mentality to many highly skilled and driven people of my generation.

I am not sure that is an entirely fair assessment of Public Sector workers. I work for a Local Authority, I only get 25 days holiday plus the 8 statutory holidays. I contribute 6.5% which is matched (so this is slightly better), and I don't get paid for doing anything over my contracted 37 hours. Some weeks I have done a lot more than that, and others I do exactly that.

I agree that we could make more efficiencies across the country but bare in mind that would probably mean large scale redundancies (the government are one of the largest employers in the country rightly or wrongly), unemployment would increase, and although the public sector was now more efficient the government will be paying out a fortune in benefits - especially as there just aren't the jobs out there at the moment so its a vicious circle.

I think perhaps the public sector should look to dramatically change the shape of its workforce. For every high paid administrator within the NHS we could probably employ 2-3 more nurses, for every senior manager we could recruit another Social Worker etc. which would help cut waiting times, improve hygiene and meet all those other targets that are simply impossible at the moment. But we also need to consider how we motivate staff and part of this is down to money - if the bankers are getting a bonus for doing?!? I don't really know what.... why shouldn't our front-line staff get a bonus for putting in extra time, or for meeting their targets something tangible which actually saves lives or improves the health and well-being of the public.