Staff at British banks could lose their bonuses up to 7 years back

[Semple]

Yes i'd be surprised if they could go back as far as 7 years.

The "bonus" culture is always a good thing, it rewards employees for exceeding the employers expectation for that role (generally). But what I can never understand is when the big bosses CEO's/COO's etc get 5-6 figure bonuses when the company is actually losing money, or haven't met profit targets.

I don't know if the likes of large shareholders in a company get any say-so in the bonuses given out. But if not, I think any bonus over say 1% of annual salary should be signed off by the large shareholders, after all it's the value of their shares that are at risk.

 

[fez]

Exactly this. This is what people forget. Or ignore because it suits an argument. If employee meets his contractual targets, and his contract states he is entitled to a bonus, then he should get one.

This is what infuriates me with the public. Who are they to say who deserves a bonus or who should give it back?

No, the banks engage in practices that allow for huge short term profits at the expense of the safety of the markets. They willingly do things that they know are dangerous and will eventually lead to problems because they can make money from it.

Saying that people deserve their bonus simply because they "hit their contractual targets" is to oversimplify the whole matter. Giving bonuses based on targets encourages higher risk and lower morals about how they accomplish their targets.

The very fact that banks got into such trouble from these practices should tell you that hitting targets does not mean that you have done it in a safe way.

With absolutely no link between bonuses and the damage that the pursuit of them does, people are free to do whatever they want knowing that any repercussions will be footed by the bank or the government if things go really wrong.

There has not been a year that people in banks on huge bonuses did not get a sizeable bonus at the end of the year. Even when the economy was in the doldrums they were still being paid a small fortune.

 

[balky12]

I'm not sure why people are saying they don't think thus will happen... It's pretty clear that those in power want this to happen and it very likely will.


One thing they do need to sort out is the tax situation re:clawbacks - people have already been stung by this under contractual clawbacks - if you've paid 40 or 45% tax on a bonus then are liable to pay it back to your employer the inland revenue doesn't always play ball. You still owe the employer the full amount even if the tax man took nearly half of it.

It will happen. Banks will just find another way to reward their employees, swerving this whole change entirely. Private sector is well ahead of the curve and always finds ways round anything the Government will throw at it.

It's where the smartest of the smart reside.

 

[Turd Ferguson]

No, the banks engage in practices that allow for huge short term profits at the expense of the safety of the markets. They willingly do things that they know are dangerous and will eventually lead to problems because they can make money from it.

Saying that people deserve their bonus simply because they "hit their contractual targets" is to oversimplify the whole matter. Giving bonuses based on targets encourages higher risk and lower morals about how they accomplish their targets.

The very fact that banks got into such trouble from these practices should tell you that hitting targets does not mean that you have done it in a safe way.

With absolutely no link between bonuses and the damage that the pursuit of them does, people are free to do whatever they want knowing that any repercussions will be footed by the bank or the government if things go really wrong.

There has not been a year that people in banks on huge bonuses did not get a sizeable bonus at the end of the year. Even when the economy was in the doldrums they were still being paid a small fortune.

So by that logic the banks should foot the bill, rather than the employees. If the institution incentivises reckless behaviour, they should bear the cost of the damage their incentives caused.

It will happen. Banks will just find another way to reward their employees, swerving this whole change entirely. Private sector is well ahead of the curve and always finds ways round anything the Government will throw at it.

It's where the smartest of the smart reside.

This is really the crux of it. If you're smart enough to earn an investment banker's salary, working for a whole lot less at a regulatory body makes no sense.

 

[fez]

So by that logic the banks should foot the bill, rather than the employees. If the institution incentivises reckless behaviour, they should bear the cost of the damage their incentives caused.

Not really. In any industry where there is a huge amount of money to be made you usually end up paying employees large sums of money so its is unavoidable to pay large bonuses. They just need to make sure that there are repercussions on both the bank and the employee for misbehaving.

 

[balky12]

This is really the crux of it. If you're smart enough to earn an investment banker's salary, working for a whole lot less at a regulatory body makes no sense.

This is where the envy comes in. Bankers are paid fortunes because ultimately someone thinks they are worth that much. They get paid outrageous bonus' because that's what you need to entice the best of the best to work for you.

Start taking away bonus' they will just reward them in shares, company cars, etc. Start trying to stop that and suddenly you lose the best of the best to oversea markets.

Ultimately, you need the smartest people heading up these institutions. They come with a big salary and can command even bigger bonus'.

People saying that if a bank makes a loss bonus' shouldn't be paid. If I am oversimplyfying things by saying if people meet their contractual targets for a bonus they should get one, then what are you doing?

If a CEO gets brought in to a company that is in the **** and made a US$100m loss last year, with targets to turn the company around. Following year it makes a US$5m loss, why shouldn't he get a bonus?

 

[Bear]

So by that logic the banks should foot the bill, rather than the employees. If the institution incentivises reckless behaviour, they should bear the cost of the damage their incentives caused.

They already do in large fines with Lloyds being the most recent for manipulating LIBOR

 

[pitchfork]

We are a country of envy. If an employee has met his targets in his contract and is entitled to a bonus he should get it and keep it.

Would you say the same of the Enron boys?

Common bonus structures are killing business these days. It's often a case of cost and corner cutting being the commonplace way of boosting figures and getting a larger bonus than actually getting off their arses and doing something of worth for the company.

In the long term it often kills the company, waters it down until people get sick of it and then they end up spending more money on a consultant to ask them why. Seen it so many bloody times it's unreal.

If you ask me it's time more private sector firms took a closer look at how people are earning their bonuses.

And anyway, I have zero sympathy for the banking industry. If it's not the investment bankers and analysts it's the ********* on the highstreet trying to sell you every financial product under the sun.

 

[balky12]

They already do in large fines with Lloyds being the most recent for manipulating LIBOR

That's what he is getting at. Banks should pay the bill. Not individuals losing their bonus'. Atleast that's how I read it.

 

[Turd Ferguson]

Not really. In any industry where there is a huge amount of money to be made you usually end up paying employees large sums of money so its is unavoidable to pay large bonuses. They just need to make sure that there are repercussions on both the bank and the employee for misbehaving.

Based on the fact that it is the PRA clawing back, I can't see how they can touch employees of an institution. That's the FCA's remit and they look to punish individuals who have acted outside of the law or who can be proven to have breached regulatory standards/requirements.

More to the point, it will be nigh on impossible for the PRA to claw back from employees if they have acted within the law and within their employment contract. They will end up going for the institutions themselves simply because they have massive cash reserves for this kind of thing, a la Basel III and the Capital Adequacy Requirements it sets forth.

Put it this way, my buddy at Goldman Sachs ain't losing any sleep over this.

Would you say the same of the Enron boys?

ENRON was a case of corporate fraud, not greed and how it is incentivised.

 

[Bear]

If a CEO gets brought in to a company that is in the **** and made a US$100m loss last year, with targets to turn the company around. Following year it makes a US$5m loss, why shouldn't he get a bonus?

I dont have a problem with it at all so long as that money isnt made off the back of mis-selling financial products to the public, rigging LIBOR or gold prices etc. Clean up their acts then I couldnt care less what they got.

 

[Turd Ferguson]

I dont have a problem with it at all so long as that money isnt made off the back of mis-selling financial products to the public, rigging LIBOR or gold prices etc. Clean up their acts then I couldnt care less what they got.

Completely agree, the sadness is that mis-selling of products can be misappropriated by the regulatory powers that be. If you read up on KeyData or Arch Cru and saw what an absolute sham that has been, you'd see that both sides can be as conniving and underhanded as the other.

 

[balky12]

I dont have a problem with it at all so long as that money isnt made off the back of mis-selling financial products to the public, rigging LIBOR or gold prices etc. Clean up their acts then I couldnt care less what they got.

The argument is changing a bit though, rigging prices is illegal. Proven illegal practices ofc warrent a bonus being taken away. Followed by jail time.

Just because a company has had a bad year, or made a bad mistake resulting in a loss, doesn't mean bonus' should be stripped. Does help though if companies have the money to pay the bonus'.

For example the subprime mortgage crisis was a failure across the board. Banks lent money to easily, however, rating agencies and regulators completely missed the ball when overseeing the debts and securities involved.

 

[anything I don't mind]

BALLS said on tv that he wants to tax banker bonuses and use the money to create jobs. Most hilarious thing i've heard from labour for a few months. How they going to create jobs, they don't create anything, they only spend other people money. Plus any tax just goes in to the big pot of stolen tax money that is already preallocated to be spent on more than they have, thus the debt. So how in the world can some extra tax be put aside for anything when they running a deficit? Its just egg shell accounting. They ultimately want to get votes from all the anti-capitalists that the government education system has produced by claiming that they want to tax the bankers. If labour were realy for the working class and all that then they would have not bailed out the banks when they had a chance to let them fail. Now they want to try and reduce their bonuses, what did they think the bankers were going to do with £100 billions? i still can't believe that the banks got all that money for nothing.

 

[balky12]

BALLS said on tv that he wants to tax banker bonuses and use the money to create jobs. Most hilarious thing i've heard from labour for a few months. How they going to create jobs, they don't create anything, they only spend other people money.

Wasn't it Labour that de-regulated banks in the first place? If it was up to Labour everyone would work in the public sector anyways and be a manager.

 

[Tunney]

Large bonuses should be paid in long-term stock options. It's more expensive that paying bonuses in cash but it would encourage the kind of long-term thinking that would keep the banking sector healthy.

Also, a lot of bonus goals are so easy to achieve that the money might as well count as part of their salary. People aren't being rewarded for doing a good job, they're being rewarded for a poor-to-average job.

 

[Turd Ferguson]

Large bonuses should be paid in long-term stock options. It's more expensive that paying bonuses in cash but it would encourage the kind of long-term thinking that would keep the banking sector healthy.

Also, a lot of bonus goals are so easy to achieve that the money might as well count as part of their salary. People aren't being rewarded for doing a good job, they're being rewarded for a poor-to-average job.

Until they short the stock and make a killing on it.

Giving 'reckless bankers' the wherewithal to **** the system isn't a good idea at all.

 

[D.P.]

Yes i'd be surprised if they could go back as far as 7 years.

The "bonus" culture is always a good thing, it rewards employees for exceeding the employers expectation for that role (generally). But what I can never understand is when the big bosses CEO's/COO's etc get 5-6 figure bonuses when the company is actually losing money, or haven't met profit targets.

I don't know if the likes of large shareholders in a company get any say-so in the bonuses given out. But if not, I think any bonus over say 1% of annual salary should be signed off by the large shareholders, after all it's the value of their shares that are at risk.

Sometimes losses are guaranteed and a very good employee will mitigate the amount of loss beyond what is expected. That employee very definitely deserves a bonus. And bonuses always reflect seniority, expertise, responsibility and the value of the assets. E.g. If a department was loosing 100m a years and someone senior orchestrated changes that reduced that down to 15m a year then the company is saving 75million and that employee should rightly be rewarded with 6figure or more bonus for making such improvements.

 

[balky12]

Large bonuses should be paid in long-term stock options. It's more expensive that paying bonuses in cash but it would encourage the kind of long-term thinking that would keep the banking sector healthy.

Also, a lot of bonus goals are so easy to achieve that the money might as well count as part of their salary. People aren't being rewarded for doing a good job, they're being rewarded for a poor-to-average job.

Stock options is a good idea. If the company flourish's your bonus increases.

However the second part of your post I disagree with. No company 'gives away' 6/7 figure bonus' for poor to average efforts.

 

[dowie]

It will happen. Banks will just find another way to reward their employees, swerving this whole change entirely.

They already have to some extent - base salaries have risen considerably in some areas already thanks to EU bonus rules.

It's where the smartest of the smart reside.

lol I wouldn't go that far