To cap or not to cap?

Serf

......On the one hand, those failing banks that are being propped up by the taxpayer need to hang on to their best staff so they don't collapse completely......

To be brutally honest, where are they going to go to? Its not like there is a surplus of employment opportunities in the city these days.

I am a red in tooth & claw capitalist, but I would cap their salaries, and cancel their bonuses like a shot. They can start earning big again when profits return.

kinglear

Its simple. If you did well last year, made money and hit your targets, you should get the bonus you were entitled to before all this started.
If, on the other hand, it was your incompetence that lead to a multi-billion dollar loss, you should get nothing - and probably ought to get the sack too. I doubt anyone will be poaching people away unless they are really good - in which case what's the problem with the bonus?

Ian Walker

Until they've paid back their bailouts, bonuses should be linked to GDP. That should focus minds a bit.

Elizabeth Roberts

Why should people who work in banks get 'bonuses' at all, just for doing their jobs properly?

Bruce. UK

Would these be the same "best staff" whose actions have brought about the need for taxpayer bailouts?

Or another "best staff" who managed to avoid being bailed out by the taxpayer.

Trumpeter Lanfried

They've blown it. Their argument was, If you pay peanuts you get monkeys. We now know that if you pay obscene amounts of money you also get monkeys.

Cap them now, ruthlessly. Remind them that there are plenty of able young men and women willing to take their place at a fraction of the cost.

bitter and twisted

They should not get bonuses at all. If they're not up to the job, they're out. If they are, they deserve their salary (like the rest of us).
Why on earth did they get financial bonuses in the past when it's obvious it only served to land us all in the mess we're in now? They should be repaying what they clearly got under false pretences in the past.
Sorry, am intolerant of this shower of self serving, rich gamblers.

Debt Junkie

Any bank that takes taxpayers money should cap all its payroll at the same levels as the Civil Service. If and once the taxpayers have been fully payed back the banks can pay whatever they want.

oldtimer

There is a solution in two parts.

Part 1 for bankers who delivered positive results consistent with their contracts (eg fx dealers and the like uncontaminated by toxic debts) pay them deferred bonuses in ordinary shares. Vesting dates optional in years 3 to 5.

Part 2 for bankers responsible for the toxic debt scandal (Goodwin heads the pack) pay them bonuses 50/50 shares and loan stock in a newly created Toxic Bank Derivatives plc redeemable in 5 years at the earliest. This means they could sweat it out while these toxic assets were run off.

This is, obviously, a grossly over-simplified solution but it would mean that future liabilities (especially the "loan stock") would rest in part on the shoulders of those responsible for them. Under these circumstances the bigger the "bonus" the better we should all feel!

Simon West

I too am a capitalist, but I would not sanction the awarding of bonuses in any tax-bailed bank. It is a philosophy of short-term personal gain amongst those employed by the financial sector that has in part led to the global economic situation we are in. Surely these bonuses just perpetuate that philosophy?

On top of this, the bonuses are being paid out of taxpayers' money. So, hard working, competent, solvent, law-abiding citizens across the UK, may of whom are struggling in the world created by financial mismanagement, have not just saved these incompetents their jobs and businesses, but are rewarding them massive bonuses too. Mad mad mad.

Daniel

There is a sensible middle way -Board members and direct Board reports should not receive bonuses, as collectively they failed to understand and manage the risk associated with mortgage-related structured products. Nor should the staff directly involved in those areas. But I don't see any objection to paying bonuses to other staff, if they had no specific responsibility for the structured products that got the banks into deep trouble. But bonuses paid to other staff should be significantly lower than in 2007, before the credit crisis began. Tarring all bank employees with the same brush simply diverts attention from the areas where real failure occurred. I would apply a similar rule of thumb to staff at the FSA.

ifabloke

Other civil servants get bonuses, why not the bankers. Or, they can work towards a knighthood instead. That won't cost anything.

PayDirt

Bonuses are a form of corruption, they should be made illegal. No more “bonuses”, you sign a contract of employment, it states the payscale, you accept it (or not) and you work for the pay (or get another job), why complicate the system with bogus tax-avoiding cash-in-hand? Sales commission is fine, but what is reasonable about paying someone extra to do their normal work?

drakes drum

All bonuses, in every respect, should be banned.

Surely people should get paid the rate for the job.

Pensioners do not get a bonus!

I also like what Obama has dictated that salary levels should be pegged.

Neil

It will make no difference at all. There are ways round a bonus/salary cap.

Deferred compensations schemes, employer contributions to pension schemes, BIKs or transferring contracts of employment such that UK legislation has no jurisdiction.

This government don't really care about the money though. As long as there are no media stories about bankers getting bonuses they'll be happy.

Mark, Edinburgh

In principle definitely no cash whatsoever to anyone above UK average income (but unfortunately there may be some contract obligations?)

As other posters say, some form of stock incentive is the way to go - isn't this what Obama is doing?

Tiberius

"...hang on to their best staff.."

Which ones would they be, Pete - the ones who managed the bank to British industry's record loss?

None of the banks which have been taken into state-ownership should be paying bonuses. Indeed the employees of NR, HBOS and RBS should be glad they've still got a job at all.

Nick

Leave it as it is.

10% of profits, if you generate a profit.

ie. If you earn 10 million in profits for the bank, the marxist solution is that you should get 10 million.

The capitalist says you get less, enough to stop you going to another bank and earning them 10 million.

The problem isn't with bonuses, its people who were paid bonsuses when they made a loss

10% to the trader, 90% to the government

biggestaspidistra

"On the one hand, those failing banks that are being propped up by the taxpayer need to hang on to their best staff so they don't collapse completely."

The public sector, social services, CEO's of Housing Associations, Councils and the BBC use a similar argument to defend high salaries. If there is somewhere else for these bright people to go, let them. Personally I dont think there is, except perhaps a hotel-barge in Humberside.

Ian C

There are some unbelievably ignorant and stupid comments here.

Alot of bankers who get bonuses only get the most of the bonus in shares in their company. those who recieved them over the past 10 years have seen the value of their past 'bonuses' wiped out by the downturn. So they have been punished already - probaly for something the majority had nothing to do with. Employees who organised their futures on the bases of being able to cash a few shares every now and then have had their personal situations turned upside down by events most had little control over. Cap their bonuses and they will all walk to the banks that are not part-nationalised and the banks we taxpayers own will become like British Leyland in no time.

The people whose bonuses we should ahve soem say about are those within the banks who made the decisions that have brought the financial world down - the board and senior managers. But even they will walk if they are not incentivised to restore the health of their bank which we as taxpayer/shareholders depserately need to happen as fast as possible.

The only question is are those particular bankers the right ones to get us to that as soon as possible? If you've got to get different ones in they must have the right financial incentives or else you won't get the right people.

Wake up everybody and stop being so damned angry - it gets you nowhere.

Hysteria

Pay Dirt and Drakes Drum - many private enerprise systems include a variable amount of compensation, determined by performance and agreed by the shareholders. This is what I signed up for in my company - not a flat rate socialist dictat that says no matter how hard I work, no matter how much I contribute, I get paid the same.

Nope - you do not have the solution.

In terms of the past culprits then I agree - senior execs/managers should not get a bonus this time, but some kind of restricted stock would be a good way forward as suggested by some in this blog.

For counter staff and others lower in the organisaiton they should get the bonus as determined by their Terms and Conditions.

Steve

Well, as I slog through my 40-50 odd hours a week of, at times, hard physical labour for less than a tenner an hour with no chance of a bonus, it truly warms the cockles of my heart to know that a group of extremely wealthy people will be gorging themselves on my money.

Don't get me wrong I have absolutely no problem with people rewarding themselves for the success of their own efforts - good luck to them. But if you need a bailout from plebs like me, it rather suggests you where actually totally, bloody useless at your job. So why any bonus, regardless of it's source?

Aless

Surely the directors of the banks are going to act in the interests of the banks, if they weren't then the shareholders would sack them all.

Aless

Ian Walker: "Until they've paid back their bailouts, bonuses should be linked to GDP. That
should focus minds a bit."

Drakes: "All bonuses, in every respect, should be banned."
Yes, rubbish lazy employees should be paid just as much as hard-working successful ones. Who ever heard of companies being free to chose their own remuneration scales, madness!

Surely that would mean that bonuses are going to be paid at the same levels as last year! At least in the present climate they're slashed.

Bill

The City bonus culture was bonkers and unfortunately has spread to the public sector. Those banks majority owned by the taxpayer should for the time being ban all bonuses or severely curtail them.

Ken

If supply and demand is working surely there is just now a massive glut of "banking talent (oxymoron)". Pay expectations should be well down. Give 'em the PM's net salary +15% fully taxed, paid onshore in cash, no deferred share sweeties, Monaco taxwraps or other disguised mitigation and complex compensation structures. Any wailers can merely be reminded whose cash is bailing them all out -
"Hold banksters to account".

PayDirt

Hysteria_
The problem is the bonus culture. Why do you need a bonus to work hard? If it is for a reasonable target, then yes it’s like sales commission: simple. Too often though targets act to incentivise bad practice, they have unintended consequences. Also I suspect they might get paid regardless of actual performance in meeting targets. You complain about working for socialist dictat flat rate: that it seems is where the banks are heading. Enterprise companies do not have flat rates, they mostly have pay-scales and reviews which account for all-round performance.

howard

city banker (and lawyers and brokers et al) are all grossly overpaid with the consequence that what talent we have in the UK gets sucked in to these basically unproductive activities. The opportunity should be taken to cut bonusses as part of a program to take the city back to its proper function as a long term fund raising operation for UK commerce and industry

Bill

I thought bonuses were too high and arguably unjustified some time ago (and I was a recipient).

THX1138

My heart say no, my head says yes.

I'm amazed to see the politics of envy so alive and well on this right wing site.

Hysteria

PayDirt - we might be violently agreeing - my point is not so much about a "bonus" - but that (certainly in my case) my total compensation is variable - the more I put in, the more I get out. Yes there is also an annual adjustment (although not this year - all pay frozen! ) - but this tends to be a relatively modest amount with a little bit of depending on individual performance.

We very deliberately do not call it a bonus. And yes - if a bonus schemeis badly thought out or badly managed then it can incentivise the wrong thing (eg badly managed risk taking) and if also the shareholders do not apply the proper pressure then we see the result.

I actually think that to support the basic capitalist principle we have to allow failure - if Joe Public bails everyone out we have simply privatised reward and nationalised risk - which is a recipe for an almighty mess.

Hysteria

THX - so maybe the "right" label is not quite, erm, right - looking at the related topic of the Lyndsey dispute perhaps more on this site have a what I would describe as traditional Tory outlook - fairplay, reasonablness, just reward for just input, responsibility etc etc - not a blind following of a "right wing" economic model....

THX1138

Hysteria

"THX - so maybe the "right" label is not quite, erm, right - looking at the related topic of the Lyndsey dispute perhaps more on this site have a what I would describe as traditional Tory outlook - fairplay, reasonablness - Oh really, why don't you go and have a read of the comments on the golliwog debate.

looks erm, very right to me just a blind following of a "right wing" provincial race model....

Sorry about that but this whole golliwog thing has got me very angry I'm disgusted by many of the comments on that thread, it feels like they are living in another century have they any idea how offensive they are to black people.

This can be a very right wing website sometimes.

cuffleyburgers

Why should the managers who brought their business to their knees and are now being bailed out by the ex payer expect to get bonuses?

They are presumably joking.

When they are making money then I have no problem with bonuses. Bonuses are good. I've had them myself.

But when they cock up so spectacularly, it is hard to justify.

And the line they need to keep their best staff is simply absurd.

I would have no objection to the best of the middle rankers being given chunks of bank stock, currently worthless, as an incentive to help the things back onto their feet.

Wilhelm

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