Should failed bank RBS be allowed to exceed EU bonus cap?
- Thread starter scorza
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Well there are people who generate revenue and do so consistently well... if you genuinely believe that there is no skill involved and anyone could do it then you could take a chance at replacing them - the good ones would likely move elsewhere and carry on generating revenue for some other bank - your bank might well generate less revenue as a result...
Its like a record company getting rid of the people who sell the most albums because they earn astronomical sums and there are hundreds of people out there who can play musical instruments and/or sing a song...
No more so than predicted by chance and the structural factors involved in investment banking. A poster above mentioned research showing that "star" performers transferred to another company rarely carry their performance with them. Other research shows that fund managers performance one year is virtually useless as a predictor of their performance another. On and on it goes: successful investors contribute little or nothing to their success beyond not being radically irresponsible; instead, it is the structural nature of the market and the availability of large amounts of other people's money that delivers large returns. It's quite possible that the only reliably way for individuals to significantly over-perform is to engage in illegal or unethical behaviour.
I didn't say there's no skill, I said there's no special skill, which is why this...
... is a non sequitor. Bankers are not rockstars, they are not star players, they are moderately skilled jobbing workers. Their individual input into the success or failure of their venture is relatively small. They probably deserve to be well paid due to the high responsibility of their work; but there's nothing about them that deserves the exorbitant level of reward they receive.
I don't know enough of what they do but I know I want a job where the bonus is 100% of your salary I'm in the public sector and never get a bonus and my last wage increase was 2010.
Where are these jobs published and how can I get one?
Where are these jobs published and how can I get one?
Doesn't matter what is in their contracts - the law states that for bonuses greater than 100% of an individual's salary, permission must be obtained from the shareholders. Sovereign law trumps contract law every time.
It's odd that I don't recall any other bank asking for permission from their shareholders to pay for excessive bonuses, why is it only my bank that is being so generous to employees and why is it only my bank that's failing so badly as a business?
There are a lot of highly skilled people working in Global Banking & Markets at RBS, extremely financially literate, qualified accountants, actuaries, CFA holders, certified investment professionals etc. That's not even including the technology side.
All these things which require learning, exams and chartership.
The performance of divisions like these are not left to, or impacted in a material way, by those who are not. This isn't a brokerage selling penny stocks.
Just tell you boss to only pay you half the monthly amount and then at the end if the year if you have met your performance targets you get the other half. Of course if you dont meet the targets then you don't get the other half of your salary. That is how these kinds of bonuses work.
If that is the case then I'm sure those clever bods have that covered
Investors/fund managers? These people aren't affected by the EU bonus cap - the performance or lack of it of people on the buy side is irrelevant to talk about a cap on bonuses at sell side institutions. There are further points to raise there too regarding what they actually get paid for and yes a lot of them are unable to beat relevant benchmarks - this is however straying off topic.
come on those are both completely subjective terms
Actually the music industry is fairly a valid analogy when we're talking about revenue earners and I'll justify it further... A front office sales person or someone in a client facing role in a private bank are probably reasonable comparisons in this particular instance:
There are plenty of successful 'artists' in the music industry... there are plenty of other people out there who are capable of singing. No one cares if the next big boy band are the greatest vocal talent around - being the best singers isn't their job, being appealing to their market (in this case teenage girls) and thus selling records is their job. Once they're established and have a name for themselves does it make good business sense for a record company to ditch them in favour of some unknowns who will cost less? Of course it doesn't - the well known boy band brings in lots of revenue, they more than pay for themselves... they only need to be ditched when they stop bringing in revenue. Its sufficient for them to be OK singers, it is necessary for people to like them and want to pay for their music.
Moving on to the sales people - its sufficient for them to have an OK-ish knowledge of finance... they don't have to be the guys with the most in depth knowledge base in order to bring in the most revenue - the necessary condition in their case is again that people like them and are willing to buy from them. A salesperson becomes established, trusted, has a good relation with clients, brokers etc... they compete with other salespeople from other institutions for orders - if two firms are offering the same quote to a client who's he going to buy from? If the salesperson moves firms are people who liked him going to suddenly stop doing business with him (any legal obstacles aside)?
It makes about as much sense to cap the bonus of an established salesperson who brings in revenue at a bank as it does to cap the royalties of a an artist at a record label...
If they're that clever then why have they managed to collectively lose £8 billion in 2013?
A cleaner doesn't have the same amount of pressure or responsibility or wage therefore lifestyle...but they should get paid the same bonus?
It is capitalism, if you were shareholder of a company wouldn't you be a bit bothered if you got told by some government that you can't take a dividend and have to give it to a cleaner instead?
No. Which part of "£8bn loss" don't you understand?
Which part of separate business units do you not understand.
Wait, no. I forgot, there is only one person working at RBS and he lost £8b while simultaneously getting a greater than 100% bonus...
OK, let's dumb it down for those who don't bother to read financials.
You get paid £1000 a month and you're hated. You messed up big time in the past. That £1000 is your profit, your earnings.
You made some bad decisions in your past related to a bike loan, you owe your parents money and your best friend Dave money.
You take all of that money and you give it to these people. You are writing it off - writing it down.
When your dad asks you how much you made that month you say 'nothing'. You are earning, but you're writing down the costs.
The point is that if you had not been making money in the first place you'd be making nothing and paying back nothing.
...but you are making money and you're paying off your debts.
So those who are contractually entitled to a bonus for hitting their personal targets wouldn't get their pay they are entitled to on the basis that your company wasn't happy with everyone else's performance as a collective?
Sounds a great place to work.
But they aren't contractually entitled to a bonus. If their contract has a clause saying they're entitled to a 200% bonus then that clause is now illegal.
Besides, if they're so good why don't they leave and start investment banking with their own money? Because they know they aren't that good I'd say, any success they have is down to being part of a team and not down to them as individuals.