Thursday, December 03, 2009

RBS bonuses

So the latest news is that if the government tries to prevent the £25.5bn bailed out Royal Bank of Scotland from paying out £1.5bn in bonuses the board will quit.

Fine let them. Okay there's the argument they present about having to attract the best and that means paying for it; but what I haven't seen is how they're justifying paying out any bonuses at all?

Oh the investment side is expected to earn £5bn this year, so the staff expect bonuses, expect what are they being paid to do anyway? If this is some exceptional growth then sure they deserve a reward, but is it? We don't know, it could just be the target that was set.

From the public's point of view it seems bankers get bonuses for simply doing what they're already paid to do, if they're not then the banks need to hire some better PR agents.


Orphi said...

(You've put <i> instead of </i> there, which is why half the post is in italics.)

Banker. Rhymes with… well anyway, I think the problem is that there's a systemic culture of bank workers expecting to regularly receive huge bonuses. It's practically part of the “standard” wage packet, even though it says “bonus” on it.

I still think rewarding the workers of a failing bank with huge amounts of money is wrong though. Don't think we should single our RBS though; if they don't do it, somebody else will, and (presumably) they'll steal all the talent. I think the whole system needs to be changed — but I have no idea how you do that effectively.

Legislation would be one way, but I think it would be rather tricky to get it right…

FlipC said...

Ah Blogger trying to be helpful, see put a anchor without an end and it'll complain, but use a bold or italic and it tries to finish it off for you.

Anyway gosh treating bonuses as wages who do bankers think they are MPs?

But no your point is valid, if the bailed-out banks aren't allowed to do it, the others will and they'll attract the talent.

As for a change to the system hmm, if no bonuses/dividends are paid it counts under corporation tax, if it's paid as bonuses it comes under the individual's personal tax. Perhaps bonuses should be classed as dividends, or bonuses don't deduct from corporation tax.

Oo the Treasury would like that tax from both ends.

Orphi said...

“if no bonuses/dividends are paid it counts under corporation tax, if it's paid as bonuses it comes under the individual's personal tax”

Dude, how do you get to know all this stuff? You're, like, superhuman or something! :-D

FlipC said...

I'd vote for the something ;-)

To be (im)modest my knowledge tends to be wide, but not always deep. Which is one of the reasons I'm always happy to be corrected on factual matters.

Anyway the advantage is that if I do knowingly start to tread in waters to deep I at least have a foot on firmer ground to start from.

Dan H said...

I'm guessing that performance-related pay is as widespread for financial traders as for salespeople, in which case the amount of the bonuses is probably (at least in part) contractual. Even if it's not contractual, it's important to give people a bonus for achieving even the expected results: otherwise, what do you do when they underachieve?

FlipC said...

"what do you do when they underachieve?"

Fire them, why not? They've been hired to perform a task, they've failed why should you continue to pay them?

I mean sure I've nothing against performance bonuses for exceeding expectations, but that's not how it's being presented.

Dan H said...

If you fire everyone who ever makes a mistake, you'll be left on your own pretty quickly.

FlipC said...

True, but it's still an available option.