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

Caged said:
I guess that's my sticking point with calling it a bonus. When I think of a bonus I see it as "yay, the company has done well, congratulations everyone", and I think everyone should get something. If you only want to pay it to your trading teams then just call it a salary.
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It might interest you to know that everyone that works at John Lewis and Waitrose is a 'partner', so all the floor staff get pretty tasty bonuses come Christmas time :)
 
I appreciate all discussions regarding the financial sector but am always amazed at the attention spent on the minor details and why the larger issue remains largely unchallenged.
While our economy is debt based, nothing will or can change. When the largest financial bodies control the value of the currency, set the interest rates and loan the money in circulation to the people at interest. How can anything be expected to change. The facts are the banks and other financial businesses have been stroking us all for years, only recently the extent has partially been uncovered. The recent financial crisis was calculated and executed with distinction. In no other walk of life could what happened been allowed to go unpunished. But it did. 5 years on and nothing has changed. No significant regulation, the banks still investigate themselves and it's right back to business squeezing their customers...the mugs that provide the capitol in which all banks require to exist. Isnt it about time the bigger more pressing issues were raised in general.
 
Amp34 said:
RBS is unlikely to be giving out company bonuses considering their huge loss, however there is no reason they shouldn't provide bonuses for those that did a really good job and helped them reduce their loss. Many people in this thread don't seem to understand the difference.

*This is what my company did this Christmas, including the receptionists.
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They are giving out bonuses, I grantee it bud!

RBS made a profit, they decided to put the profit towards write downs which, on paper, looks like a loss. Imagine you wanted to overpay your pension one month by everything you earned that month - you still earned money you just decided to pay it towards something else (pre-tax).
 
Mr Jack said:
... 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.
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Actually, from my masters in finance, which I'm sure isn't even a fraction of what they do in real life, I'd say that they are more than moderately skilled. They are phenomenally skilled, in ways (that I'm just starting to realise) that most (including myself) people just are not.

Vanilla said:
I hope I am simplifying it! That's the intention.

The point still stands - make profit get bonus. As a company they made money and as a company they should dish out bonuses how they feel.

What the alternative? Talent leaves and we get left holding a pup.
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IIRC, agency theory covers this. You've got problems when dealing with remuneration of senior figures. If you give bonuses, then there is a emphasis on sort term goals in order to meet and exceed targets. (for reference look at AIB and their massive advancement of their loan book.

Greater loan book = greater profit = greater shareholder value.

This is not sustainable and leads to a toxic environment whereby individuals negate risk management in order to make quick cash.


However, if you just go for long term remuneration for example stock options at later date, which in theory sound great (eg they get stocks which they can exercise the option of at a certain point in future, hence its in their interest to make it sustainable etc), but cause problems of their own. Eg becoming too risk averse, a negative seeing as there is always risk to be embraced, a core of business.


It's a difficult one, and I'm not qualified enough to make a statement. If the people in RBS who are getting the bonus went extraordinarily beyond targets and call of duty then MAYBE it is appropriate. Otherwise, it looks bleak! :)
 
sports_brah said:
Greater loan book = greater profit = greater shareholder value.

This is not sustainable and leads to a toxic environment whereby individuals negate risk management in order to make quick cash.
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I agree and it's what got them in this mess in the first place but over the last few years they have managed to reduce their loan book by £200bn.

I know this just sounds like another number but to put it into context the UK economy is worth only £1500bn. To do that and make a profit....I think is a hard task done well.

People think of the Wolf of Wall street when they think of bankers and I bet some of them are.......but I think they have done well and I absolutely want them to do well because we the tax payer are balls deep into them!
 
Theophany said:
The psychology of incentives isn't that simple though. By rewarding short-term performance you're actively encouraging myopic behaviour.

For example, I work at the largest and most established multi-manager investment firm in the world and the bonus structure for those on the trading floor is structured in such a way that you are rewarded for decisions that have paid off in the long term (i.e. 3 years). Being CFA level 3 is a bare minimum for anybody working on that floor and a disproportionate number have PhDs in finance and economics-related fields.

Psychology aside, RBS is a taxpayer-owned bank. Normal rules do not apply. Frankly, 200% base bonuses to employees of a bank that is a state-owned dog are unacceptable, regardless of whether or not said employees made those mistakes. If they're that good that they are deserving of that kind of remuneration, then they should have no problem getting another job elsewhere.
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How much corporation tax and capital gains tax has RBS paid to the government in the years before the bailout? I bet it was a lot more than £5bill.
 
I don't think the general public is qualified to decide on the fate of RBS bonuses. Add to the fact that they see "banker" and think "pond scum" because secretly they want to be bankers but can't be bothered to do the Maths A levels and then the BSc Finance degree and then work from the bottom upwards in the most expensive living cost postcode in the UK, whilst working 20 hours a day (including client entertainment).
 
Vanilla said:
They are giving out bonuses, I grantee it bud!

RBS made a profit, they decided to put the profit towards write downs which, on paper, looks like a loss. Imagine you wanted to overpay your pension one month by everything you earned that month - you still earned money you just decided to pay it towards something else (pre-tax).
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I know. My point was they are probably not giving out a company wide bonus but performance bonuses for those who performed well.;)
 
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scorza said:
http://www.telegraph.co.uk/finance/...73/RBS-warned-of-credit-rating-downgrade.html

It gets worse as we're now being told that there's an increased risk that RBS can't pay its creditors, but yet can still pay out billions in bonuses to staff. How does that make sense from a business point of view?
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It's no surprise - http://www.telegraph.co.uk/finance/...5569/RBS-still-on-Moodys-downgrade-watch.html

Been ongoing for years. They would have been downgraded to junk if they had not been taking measures.

Guess what those measures were? Writing off profit to go into the 'bad side' and reduce their risk on bad assets.
 
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