Should failed bank RBS be allowed to exceed EU bonus cap?

[ubersonic]

I don't know the details but that sounds reasonable to me.

The government of Iceland seized control of a struggling bank which held the assets of many British citizens and organisations, they then laundered all the money into a new bank they had set up and held a referendum on whether to fulfill the country's legal obligation to guarantee the savings or not. Still sound reasonable?

 

[Edrof]

We have zero control over banks and we should stop pretending that fairness and morality exist within capitalism. Some people benefit at some point but just choose to ignore its ugly side.

This.

All those Lehman Brothers bankers who were laid off at the beginning walked straight into another bank or made a ton of money as sole traders with their existing contacts. It's an Old Boy's network through and through.

 

[dowie]

It's not like the cash is coming from the government so if RBS don't pay the bonuses to the staff it will just end up in the top CEOs or shareholders pockets instead (all of whom are already rich).

Sorry but this is incredibly naive... some of the biggest shareholders in large public companies tend to be pension funds... the shareholders aren't necessarily rich but are acting on behalf of plenty of ordinary people who've invested for their retirement, or who are part of employer pension schemes etc...

In the case of RBS the UK govt is an 80% shareholder.

 

[dowie]

Re bonuses - it doesn't make sense to cap them. If you want to discourage excessive risk taking then not paying them in cash, having clawback agreements, paying them in a staggered manner are solutions. Simply capping bonuses will lead to inflated salaries in an attempt to retain staff which is just going to expose the bank to further risk. There is also the issue of key revenue generators simply jumping ship...

 

[Amp34]

It's all very well saying RBS made a loss, no one should get a bonus but what happens if the people getting 200% bonuses are those working in the retail sector, or an investment department (as an example), unrelated to any of the scandals and the reason (by way of making £1bn profit this year) RBS didn't make a loss of £6bn this year? Shouldn't they be rewarded for their efforts, even though they are in a company that made a loss overall or should the good ones be left to fester with the rest? That would definitely move the company forward, all those that can would leave and all those that can't (or cant be bothered) would stay, leading to a downward spiral.

While it's not as simple as that it's the same kind of argument to those stating no one should get a bonus. Whether a 200% bonus is the right way of rewarding people is another question.

The problem is when people talk about this they forget that the money still exists regardless of who it is paid to. It's not like the cash is coming from the government so if RBS don't pay the bonuses to the staff it will just end up in the top CEOs or shareholders pockets instead (all of whom are already rich).

Instead of just capping bonuses, I'd rather see a law that recognises that no one employee is an island and that bonuses must be shared more equally amongst the business' staff at the lower end of the pay scale. Yes a banker there may have made a billion for RBS by sitting at his terminal buying and selling non-existant stuff, but where would he be without the cleaner keeping his work area clean, the engineer keeping the lifts in their swanky offices working, the receptionists booking people in or the security guard keeping the riff-raff out?

Probably working from home doing the same job...

The problem is the cleaner, technician and security guard are all easily replaceable, the technician being the only one that has any real skill set difficult to learn. A trader who is good at their job is going to be very difficult to replace and a huge asset to their company.

Salary and bonuses are generally a combination of skill set (and how long it takes to gain that skill set) and replaceability. To make money you need to be skilled and difficult to replace.

 

[gettothechopper]

capping is not the right answer

anyway nothing wrong with rewarding SUCCESS

underlined / bold / capital letters because the real problem was with rewarding failure

capping one bank just guarantees that your staff will go work somewhere else
and this idea that the tax payer owns the bank and therefore is entitled to a say on running it is stupid (in that most people wouldn't have the slightest clue (me included) what is good or bad for running a bank)

a cap would just result in higher base wages, and a percentage cap would be much more painful for your lower down guys who earn normal world base wages - some bloke on £500,000 to £1m a year wont mind only getting 100% bonus compared with mr smallguy with his 35,000 getting his full bonus

 

[pitchfork]

Should we give massive bonuses failing people in failing institutions?

No, is the answer to that, quite why they want to discuss it is beyond me.

 

[Basher]

Should we give massive bonuses failing people in failing institutions?

No, is the answer to that, quite why they want to discuss it is beyond me.

Who says the people who are getting the bonuses are failing?

 

[scorza]

It's all very well saying RBS made a loss, no one should get a bonus but what happens if the people getting 200% bonuses are those working in the retail sector, or an investment department (as an example), unrelated to any of the scandals and the reason (by way of making £1bn profit this year) RBS didn't make a loss of £6bn this year? Shouldn't they be rewarded for their efforts, even though they are in a company that made a loss overall or should the good ones be left to fester with the rest?

It's not good business to give staff discretionary bonuses when the business is failing, and as a shareholder (taxpayer) I think management should make good business decisions.

Doubtless the staff affected will be thinking they'll just walk into another job if they don't get what but the reality may be quite different, and in any case whose to say that their replacement won't be better? Talent management succession planning is just something that businesses have to do these days, RBS needs to become at least competent in it if it wants to stop failing.

 

[Kappa]

Take one talented banker, makes a tremendous profit for RBS, and only gets a double salary bonus... they're going to be off to Goldman/JPMorgan like a rocket, not for one second I believe they would stay out of loyalty, it's all about the money. So where does that leave RBS? In a worse position than before.

 

[toshj]

To blame "bankers" or even "RBS bankers" for the state of bonus culture is akin to blaming the excessive footballer salaries on the Accrington Stanley Under 18's reserve goalkeeper. It's public naivety of an industry where everyone is lumped in together and blamed together.

The credit markets were solely responsible for the crash. At the time of the crash, on average, an investment bank committed around 12% of staff to the credit markets. This already means that 88% of "bankers" have had nothing to do with the financial mess, and have worked hard at creating profit despite being lambasted for doing so. Further more, of that 12% of credit-focused employees, only a few of them would have actually had any investment authority - mostly traders and structurers.

In 2010, RBS had one of the worlds strongest Interest Rate Derivatives and Hybrids businesses. It turned almost £800m in one year. Subsequently, the politicians and the public threw their dummies out at bonus time and the senior members of the IRD and Hybrids business got screwed on their bonuses (compared to those at other banks, and also based on them creating £800m from nothing). They've since almost all left the business to join other investment banks where they're appropriately rewarded, leaving RBS (and the relevant investors and shareholders) looking at a shortfall of around £300m-£400m on that IRD operation alone.

Doesn't seem like sensible action to me. Seems like uneducated public outrage and jealousy.

It would be wise to factor in to almost all arguments about the crash and banker bonuses, that almost all members of the credit businesses that messed up - RBS, Lloyds, Morgan Stanley, UBS, etc. - don't work at their respective banks anymore.

 

[Caged]

How on earth did we get into this position where giving double someone's salary as a bonus was considered standard, to the extent where people will go somewhere else if they don't get it?

 

[pitchfork]

Take one talented banker, makes a tremendous profit for RBS, and only gets a double salary bonus... they're going to be off to Goldman/JPMorgan like a rocket, not for one second I believe they would stay out of loyalty, it's all about the money. So where does that leave RBS? In a worse position than before.

Let em go, there's thousands of talented bankers out there waiting in line for a job or a promotion.

Don't pander to someone just for coming to work.

 

[ubersonic]

How on earth did we get into this position where giving double someone's salary as a bonus was considered standard, to the extent where people will go somewhere else if they don't get it?

If bonuses weren't so big then wages would have to be raised, it's no different than any other job just there's a much greater emphasis on doing well rather than just showing up to work.

 

[Duke]

It all depends... Yes the company made losses BUT some individuals within that company will be working their *** off to try and keep their job and will have reduced the losses.

They, in short, should be rewarded for this.

This really ^

 

[dowie]

It's not good business to give staff discretionary bonuses when the business is failing, and as a shareholder (taxpayer) I think management should make good business decisions.

Doubtless the staff affected will be thinking they'll just walk into another job if they don't get what but the reality may be quite different, and in any case whose to say that their replacement won't be better? Talent management succession planning is just something that businesses have to do these days, RBS needs to become at least competent in it if it wants to stop failing.

Why tie their hands then.... if they want to keep certain people then they'll need to pay the going rate for them - if they're then forced to increase basic pay for these people they've got less flexibility when that particular business unit doesn't perform well.

The whole point of variable compensation is that it gives them flexibility they can pay more when some area of the bank is doing well and can pay less when an area of the bank isn't performing well.

 

[Amp34]

It's not good business to give staff discretionary bonuses when the business is failing, and as a shareholder (taxpayer) I think management should make good business decisions.

Doubtless the staff affected will be thinking they'll just walk into another job if they don't get what but the reality may be quite different, and in any case whose to say that their replacement won't be better? Talent management succession planning is just something that businesses have to do these days, RBS needs to become at least competent in it if it wants to stop failing.

But it is good busines to reward your successful employees. As for whether staff can walk in to another job, that's the point I was making. The balance of probabilities says the more successful are probably more likely to get jobs quicker. Talent succession only really works if you can persuade the talent to come to you, generally by providing at or above market rate for their skills. Few good people are going to work for a company that either doesn't give as good/better remuneration or has a reputation for not giving it.

Ergo the good find jobs, the bad can't and stay on and you end up replacing those that were good with people who can't get jobs in the better paying banks. Into the downward spiral you go.

 

[Amp34]

Let em go, there's thousands of talented bankers out there waiting in line for a job or a promotion.

Don't pander to someone just for coming to work.

So RBS ends up as a training house for other investment banks. That'll go well...

 

[pitchfork]

So RBS ends up as a training house for other investment banks. That'll go well...

Sod em, if the employees aren't performing? Bin em, get the next lot in.

 

[dowie]

Sod em, if the employees aren't performing? Bin em, get the next lot in.

But you're advocating the opposite... encouraging an environment where the employees who are performing particularly well have an incentive to go elsewhere whereas the mediocre perhaps have a reasonable chance of higher basics and promotion by staying put.