Goodbye – off you go
Wales Business — By Duncan Higgitt on December 3, 2009 10:22 amYOUR tears are once again being elicited by the callous bankers (substitute if required) that drove us into the swamp of recession, over talk of halting their expected huge remuneration for this year.
In a move that speaks volumes about where its collective head is at, the board of RBS has taken legal advice after Chancellor Alistair Darling suggested that the Government may veto bonuses, which are usually paid out this time of year.
RBS is planning to hand out £2bn in additional payments, with three quarters going to its investment arm for a job well done in achieving forecasted profits of £6bn for this year. That is pretty good. Barclays Capital made pre-tax profits of £1.4bn for the first nine months of the year, although it also took over what was left of Lehman Brothers.
The bonus pot has risen from last year, when there was outcry over payments of £900m. The board has rolled out the usual reasons – you have to pay competitively to attract the best talent – while also reasoning that the more money RBS makes, the quicker it will pay the enormous debt it owes the British taxpayer.
If the execs don’t get their own way, the lawyers say they should resign en masse. It’s a little bit of an over-reaction, judging by the usual out-of-focus and dislocated remarks coming from Whitehall and directed at the City, but there are perhaps three things that the RBS board has overlooked while throwing its toys out of the pram.
Firstly, the money that the Treasury has paid out to RBS and fellow irresponsibles has gone as far as the public is concerned. Of course it could be paid back, but most people have resigned themselves to never seeing again the many billions that we have squandered on this crumbling institution. If we do, it’s – ironically – a bonus.
Secondly, being resigned to such a fate is a long way from saying we are no longer angry about it. Just when we thought RBS’s ineptitude, and particularly that of former chief Sir Fred Goodwin’s, could no longer plumb new depths, we discover that the dreaded double-dip recession is after all quite possible in the UK because of one bank’s exposure to the impossibly fanciful Dubai bubble. That bank is RBS.
Lastly, I just don’t buy this competitiveness argument. Anyone working at such an unstable business such as RBS is either unable to find work elsewhere, or is an opportunist who went in there with their eyes fully open. That they haven’t calculated the risks to themselves – and after all, risk assessment is what this is all about – then that is just their hard cheese. Perhaps they should go find a job at a struggling regional manufacturer and find out what it’s like not to live on Government subsidies.
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8 Comments
Whinging bankers or Binging w*nkers… you decide
Agree 100%. Given that we own this bank we – as taxpayers – need to start dictating the terms and conditions. £2bn buy a lot of public services as well as champagne. I hope they resign, then we don’t have to pay redundancy payments to the greedy *ankers.
Nice turn of phrase, Huw. David – there’s that undiminished anger of which I speak. Will the country be any worse off without them at the helm. I don’t think so…
The Government has to call their bluff, let them go.
Has anyone done the math on whether the £2bn in bonus payments would be more/less than the effect on share price of a company that suddenly loses its board and all the income generators?
…and as the commissions for the major income-generators are directly linked with a formula to their performance, then not giving them their agreed commissions will surely lead to them suing their employer.
Forget job title or industry, wouldn’t we do the same?
Dubba – first of all, share prices fluctuate. When the media report equity volatility, they usually do so on a day-by-day comparison. Most investors know that – with exceptions that prove the rule – the longer you leave your money in, the more it makes. So therefore its down to investors not to panic.
Secondly – most bonus schemes are not linked into remuneration and remain largely at the discretion of financial institutions, within boundaries. If they were, then the Treasury wouldn’t be making a fuss over contractual matters.
Thirdly – who is to say that risky stock like RBS (go back to my Dubai observation) will suffer a further loss in investor confidence if the board goes? Many investors may feel that the board is damaging the company’s public image in what it is doing, a potential devaluer in itself.
Lastly – how important is share price in the case of RBS, when we are its backers?
Thanks for the reply, Mr H.
Maybe share price was the wrong phrase. I meant long-term profitability. The Govt will need to sell on RBS at some point; and it would want to do so as a a going concern, full of experienced, good quality staff. In an industry of a few, big players, competition for the best is massive and the best at RBS – the traders who consistently make the huge profits – will move on if they are not rewarded.
If you are looking to invest in a bank in 10 years time, would you put your money into the one with the best staff earning the best returns, or the one containing those willing to work for the lowest industry wage, bringing you mediocre returns?
I was specific over commissions rather than bonuses because, as always with baying crowds, the facts are far more boring than a good ole lynching. I was chatting with a friend earlier this week. He works for the trading arm of a well known bank (one that has needed no Govt bailout), and has just returned from Singapore for the holidays. I spoke with him again last night, and is happy for me to mention our first chat.
He works as part of a team of four, and all are paid a surprisingly small wage. On top of this, he receives an additional discretionary bonus based on the performance of both his wider department and the company as a whole. This is his bonus. If it is a big one, then fantastic. If it isn’t then, and I quote, “I won’t cry over it.” His total wage and bonus last year came to £50k (thanks for letting me mention that J).
However, the major part of his income is commission. Like any salesman, his commission is based squarely on the level of income both he and his immediate team generates for his employer. Last year, his commission came to a little over £300k (again, thanks again J).
So there are bonuses and there are commissions. The former is discretionary. The latter is a contractual obligation. His take is that the current furore has most certainly been caused by bundling the two separate payments into one and calling it a bonus.
Maybe that’s a comms issue for the banking sector?
So yes, totally agree with the public on bonuses. But as for commissions, well I just hope the UK Govt doesn’t go stomping all over employee rights in favour of populist political expediency.
We are a nation in pain, but should we point fingers at a set of easily identifiable targets, turn them into social pariahs, blame for all life’s ills, and ensure that everyone’s attention and anger is firmly fixed in the direction of the accused.
we have seen this strategy before: from a certain far right political party that uses exactly the same emotion-based finger-pointing as a great defence mechanism to take attention away from itself, and gain no end of cheer from those who feel cheated.
But it is ultimately a very slippery slope and does nothing to solve the underlying causes of the problem and their, and our own, part in it.