I don't have a problems with the bonuses that are received by bankers. I can't comment on the type of work involved, I don't know. I think the bonuses should be taxed, I also think that if the bank has been bailed out by the tax payers then it should be lesser. What is not made clear is how much money the bankers have made or saved in the year. Sure there are people like doctors, medical people etc who do demanding jobs under difficult and stressful conditions. The way I see it is could a banker save someone's life, probably not. Could a doctor speculate on the markets and trade on futures and stuff I don't understand, again probably not. I imagine the risks involved in banking are massive, and like any job, the greater the risk the greater the reward. A mate of mine told me about someone he knew that went out to Iraq in the early days to do telecoms work (on a consultancy basis for a private firm I think) who was being paid 4 figures a day from memory. A bad day in banking can lead to catastrophic losses, I am sure the job, whilst glamorised my many, is a lonely, stressful, cut-throat and hostile environment and certainly not one that I would like to work in.
I cannot comment on ATCs because I don't know much about them, so I will capitulate and assume they earn the sweet FA like you are insinuating. "Bankers" (which is such a stupid term because it doesn't even really define what we are talking about here), in this context, effectively run on a comission scheme. The more successful they are, the more money the generate, the bigger their paycheck is. That's the thing. It is relative when you take into consideration the amounts of money they are ensuring is made. Yes there are risks. The guys who lose a million a day for a month (trust me, it happens), surprise surprise, lose their job. The guys who make 20 million in a month, probably get about 200 grand of it at the very, VERY most, and keep their jobs. That seems pretty fair to me. Are doctors making 20 million a month for the NHS? No. Are there thousands of doctors? Oh Yes. Are they some of the highest remunerated workers considering the quantity of them? Yes. Are there thousands of these "bankers" that make the sort of figures you are complaining about? No. Are these relatively rare people making literally billions for the economy? Yes. Are bonuses taxed? YES. Let me re-iterate. Doctors and ATCs are not a fair comparison because THEY DON'T DIRECTLY MAKE ANY MONEY OF A VALUE THAT HAS AN ECONOMIC CONSEQUENCE!!!! PS. I read the upper end of ATCs earn about 100k pa. That's quite a lot considering they can't exactly take their work home at night to ruin their family life and free time. And I assure you, any CEO worth their salt does this. And how is the stress of 100 million pound deals over your head not comparable to an ATC or a doctor?!!! It strikes me that you have no concept of the sort of money some of these guys are responsible for. I agree, there have been many, many mistakes in the past, but a lot of these were OKed by regulatory bodies when they should not have been, so banks are certainly not solely responsible - Labour is at just as much fault here. But I think the attitude of bringing a bonus down to what is a large sum of money for joe public rather than an enormous sum of money, only strives to demonstrate that joe public still doesn't quite understand how the financial sector from a very BASIC standpoint, works.
two little things, the RBS guy actually didn't hit all his targets, ie share price was down, the board gave him bonus because "he was on his way to hitting his targets", well when he actually hits them talk about a bonus, till then on the way does not equal achieved. and secondly the new way of giving shares as a bonus because this way the person receiving said shares will want the business to do well, is a crock, if you keep those shares for 5 years you can sell them without paying income tax, or at least that's how our share schemes worked. seems like a nice way to avoid yet more tax payments. I'm fine paying big bonuses to a high risk job if it actually is high risk, but the banks like rbs showed that if they are about to fail the government will step in to save them, this loses the risk weighing factor.
My opinion: give tiny bonuses until they've paid back the taxpayers who bailed them out in the first place. We weren't even given a choice. From an article posted just minutes ago: "The taxpayer owns 82 per cent of RBS and is sitting on a loss of £22bn from the £45bn bailout." source: http://www.independent.co.uk/news/b...rbs-staff-prove-thecritics-wrong-6660935.html When that debt is £0.... THEN good bonuses should be awarded....to EVERY member of staff who worked hard and contributed to clearing the debt. Of course, against a debt of £22B, £1M is nothing, but a lot of nothings can add up to something It was a poison chalice anyway. Hester should expect a tough time of it. His "basic salary" is £1.2M. He lives comfortably.
I stand corrected regarding him hitting his targets. With regard to the share bonuses, bonuses of the size we are talking about would get capital gains tax on.
even if its the market standard to pay such amounts, its not justified thats my point, but one day I guess the industry will get a wake up call and the wages will be proportionately downsized, then the bankers with particular emphasis on the investment bankers will know what real stress is, i.e having to make ends meet.
I agree with the idea of large bonuses if its relative to performance. The RBS guy who recently turned his down shouldnt have caved to the pressure. If I had run a company and taken it from making a loss to a £2bn profit then I think that a £1m bonus is being a bit stingy. It doesnt matter that the company is partly owned by the government. The better it performs the more profit we make when it the shares are finally sold. Paying the people well that are capable of ensuring that this happens must be a good thing. Proportional to what?
The job itself, I had a friend in investment banking and what I heard, he did nothing but speculate risk on a daily basis, in his own words, "everyday was a daddle". Its not rocket science, its gambling whatever way you look at it. Yea it can be stressful, only when your losing the money which IMO a good banker more than often will not, even though market shares are up and down like abbeys knickers. I give up on this thread, i live in the real world where hard work for the most part, especially at time of recession is not even appreciated let alone rewarded
My specific issue is that when people such as yourself, AoE, start talking about "bankers bonus" and keep talking about it, that stirs up people into thinking that it's banks that are the issue and, in turn those employed by the banks. I have been a personal banker and now a manager of a retail bank. When I started a few years ago, personal bankers got paid a monetary amount for insurance based products and fee paying accounts and it was not out of the ordinary to see commissions in the region of 3-4k each month. I never saw them personally but they would be printed at the bottom of your incentive statement as a sort of league/ look what you could be earning. That changed three months into the job. The most I see people getting paid as a bonus now is around 1-1.5k. We have moved away from payment based on product but service scores and advocacy. We could have a customer get a phone call who gives 10 out of 10 for everything yet not be fully satisfied and that score goes against us. As a manager now. The incentive is lower yet there is a larger criteria to hit. Tbh, these threads boil my blood just like investment banking boils yours. I work hard, leave early every morning and miss my kids bed times most nights and I am fed up of the people bleating on about something they no little experience of.
I'm trying to remember the last time billions of taxpayers money was thrown at the Premier League to bail them out.
It is indeed a tricky comparison. Can you compare money made (arguably for the 'economy', arguably not --see Black Wednesday) to human lives saved? Let's put it this way: if you have cancer, who you gonna call? And who has been screwing up the economy of late? Banks or (regardless what the government implies) public sector workers like doctors and nurses? Just sayin'. It is valid to point out that we don't really know what a banker does for a living, so it is hard to make judgements. Similarly you do not really know what doctors (or nurses) do for a living. I can assure you that all of them work significant amounts of overtime, that doctors often start at 8.00am or earlier and do not go home until 8.00pm or later, and that they all take work home. I try not to, but I do too. Last December I worked --unpaid-- over the weekends to get service data ready for the commissioners. And being responsible for millions sucks. Being responsible for the life of scared and suffering patients, each with equally scared family, well, that takes stress to a whole new personal dimension. No. If someone makes millions for being responsible for millions, then they are responsible. They don't get to share blame with regulatory bodies. They cannot lay tgeblame at someone else's feet, or share it around. That's why they earn the money they do. As a clinician I am fully responsible for my practice. I cannot share blame around. That's why I earn the money I do. I think it is fair to say that prople don't really know what doctors and nurses do either. And in any case, research by the US Federal Reserve has shown that big financial rewards do not actually improve performance. In fact, beyond a certain ammount it reduces performance. People are funny that way. Bankers bonusses are a culture. And cultures are not rational.
I don't really see how footballer's are getting drawn into this. Footballer's provide an entertainment product, their payment for which is determined by revenue they create through audience purchases (tickets, merchandise), advertising income and competition prizes. If a player wasn't worth a potential £150k a week to a club then they wouldn't pay them that. Nothing makes the fee paying audience and advertisers hand their money over, it is fully optional. I happen to think that people who pay for match tickets and Sky subscriptions are mugs and deserve everything they get. Banks are quite different as they are pretty fundamental to society's infrastructure nowadays. Using them is still optional but it is also entirely conventional and interwoven into so much of how we live our lives. Bankers also have influence over the stability of the global economy, as we are all aware, and therefore the management of performance and rewards has far greater implications for the world than what a footballer does. You could say this means bankers who perform well deserve their bonuses, but it should also mean the consequences for failure should be greater - I think there's an imbalance here. You can say multi-million pound pay packets and bonuses are obscence/immoral etc. but at the end of the day money is only good for spending so it all goes back into the pot anyway. I f you want greater influence on the movement of said money then perhaps you should consider employment in a realm of greater global significance e.g. banking or football.
I was talking specifically about ATCs. I personally believe that doctors are not remunerated fairly at all for their responsibilities, and make no allusions to the kind of stress they are under. I am quite happy to accept that their jobs are some of the toughest in the country. Nurses on the other hand I don't agree with so much but I think that's a management issue. 1 in 5 that I have come across are truly brilliant, the rest seem disinterested. I know two nurses socially, both complain about how poorly everything is run and how many of their colleagues slack off. But of course this is anecdotal evidence so not really relevant, and I suppose you could say that about any workplace. I don't understand why nurses should be given any particular special treatment though, but I'm a big fan of avoiding putting a price on life because it's an impossible concept - at the end of the day the NHS has to be run as efficiently as possible and getting caught up in morals only adds another possible hindrance to getting down and doing what is feasible. But that's another debate for another time or thread. With reference to the regulatory bodies - I'm more referring to the sizes and conditions that were agreed to when they shouldn't have been, not what actually happened afterwards. I admit that the investment funds involved here were being a bit on the wild side seeing what they could get away with, but there were a lot of unconditional bonuses which were irrelevant to performance so responsibility was effectively a moot point that regulatory commissions allowed for no good reason. That has very much changed though. As for the US federal reserve study you mention, firstly the fact that it came from the federal reserve is really quite a negative (again, read something by Peter Schiff and you'll find out how messed up the FR really is), but I quite frankly refuse to believe that. Tell that to any recruiter in quantative finance, any luxury car salesman, in fact, any salesman that deals with very valuable goods. Performance commission is an accepted commercial method of getting the best out of your workers. If it didn't work, head honchos would be holding onto their profits...! The culture thing can only answer that to a point, especially when there are serious figures to be gained in things like hedge funds if percentage bonuses were dropped.... I actually think the concept of making ends meet is quite applicable in this case. What do you think investment bankers do? They work with money to ensure that it gains the 6% or whatever promised to their clients. Say they don't "make that end meet", they lose their client and thus their pay/bonus if they did well, and the reputation factor is almost impossible to conceive. Once you bomb 100 million of a client's money down a drain and don't even succeed in mitigating, who the hell is going to come to you for investment advice? One really bad decision and you're working career is properly over. It's very comparable, albeit on a grander scale.
^^ This. Research has shown that bonuses based on short term performance often hurt the company. The bonus structure should change to support more sustainable long term growth for the bank. How many of you posting in this discussion have actually read into what caused the entire banking crisis? If you do you will be somewhat surprised as to what actually happened. Do investment bankers and bonds traders deserve their bonuses? IMO no they don't as they have no idea what they are selling, it's purely gambling on a massive scale. A handful of very clever people in Goldman Sachs created an entire bond market based around selling mortgages that any one how looked at them for more than a second would know were utter ****. Mortgages were being sold where you didn't even make any payments, you just accrued interest. Seriously wtf? The real magic/fraud was Goldman Sachs managed to bundle these mortgages into an investment that was so complicated it looked on the outside like a conventional mortgage bond and was rated as a triple A investment by the rating agencies. They managed to fool the entire industry that the utter **** they were buying was made of gold. That's why when the market imploded banks like RBS claimed they only had a very small exposure to it as they had no idea what they were buying. Then you get onto the subject of credit default swaps which is a whole other world of WTF?! The entire bond market has been implicitly designed by those involved to be as complicated, opaque and difficult to regulate as possible. So basically I say tax the hell out of the investment bankers/bond traders and if they threaten to leave the UK then let them go. The vast majority are not special or particularly bright and they could be replaced easily. The unfortunate thing is if we really want to tackle the current regime and get it back under regulation and oversite it requires global co-ordination and when you have ***** like Cameron in power who keep telling the EU to leave the city alone nothing will happen. Despite lots of rhetoric and words the US administration has just reset the system and set the time bomb ticking again.
Yeah, and people wouldn't pray if it didn't work, right? There wouldn't be any churches and priests and stuff. And people wouldn't gamble if they didn't win. We wouldn't have casinos.... Come on, son. You know as well as I do that people are not rational like that. Hedge funds, like miracles, like gambling wins may go up as well as down. When they go up it obviously was ninja epic hedge fund management skillz the likes of which you wouldn't find in another mere mortal/God/my secret card counting system that will break all the banks in Monaco or my lucky underwear or rabbit's foot. When they go down it is unforeseen complex global economic variables/the Devil/a jinx or the vibes not being right because the moon is in negative alignment with the ley lines. Attributions are subjective like that, especially after the fact. The rewards in banking (or football, for that matter) are a cultural issue, subject to the same dynamics as those in gambling and other superstitions, not a rational one. "I simply cannot believe that" is not a compelling argument. You may not believe it but the objective science says it's so, sorry.
At this point in time the point is not whether it is justified to pay investment bankers, fund managers, traders, etc. i.e. not retail (read High Street) bank or back office operations and administration staff who may get ONE month's salary as a bonus, the point is it is often the case that they have agreed employment contracts that commit their employers to pay these bonuses; a pot to be shared sometimes of 1/3 revenue generated! Who wouldn't cry "foul" if their employer didn't pay what their agreed contract states, regardless of the amount? These levels of bonuses aren’t available to the average person who works in a bank; they are committed to those who are employed to take risks in anticipation of great return. Try sleeping at night knowing you’ve just lost your employer $20 million and maybe your livelihood to boot. As I don’t think they’ve actually published the 2011 full year accounts yet I would ask whether this is actually profit based or whether the previous year’s loss was simply as a result of one-off write-downs and write-offs resulting from prior years’ activities, which would always make the years in which they occur look substantially worse than a normal trading year, or debt revaluation etc. I think the real question is: Is like for like net profit, having stripped out one-off adjustments, improving sufficiently to warrant such a bonus (assuming they are not continuing to write off new debts)? 6% if that’s what they’re looking for they’re at the low end of expectations in the market I assure you – try closer to 10-15%! Nexxo, that’s not wholly true. Firstly, if the regulatory bodies had not allowed free reign such as the expansion within domestic banking groups to incorporate the high risk areas of banking – i.e. speculative investment, trading and financial engineering, then “our high street banks” – retail banking – would not have been at risk. They are also the bodies who set capitalisation requirements in the first place, obviously too low to support a market catastrophe. Secondly, everyone seems to forget the role played by the ratings agencies in this whole situation. They are the ones, responsible for rating companies/countries/trading instruments, who rated CDOs as AAA when many were, at least in part, made up of extremely high risk US housing assets reliant on low paid workers meeting the increasing repayment levels of low start mortgages. In no real world would such a mortgage, individually marketed as such, be rated AAA, the risk of default would be too high. IF that is true, that is likely to only apply over and above their minimum targets, after all if they don't meet targets pretty soon they don't have a job. But as many of these “bankers” have minimum targets but open ended bonus incentives, i.e. the more they bring in the more $ they get (not proportionally as a percentage but in real money) I would strongly doubt the validity of the findings. Why? for 2 reasons: 1) there's always the fear of someone better coming along, and 2) because “high fliers” in the banking and finance industry often live to work not work to live like the rest of us. No I'm not a "banker" but I've worked in a number of banks for more years than I care to remember
We have casino's for three reasons. There are people who find throwing money away fun. There are people who get hopelessly addicted to throwing their money away. And finally, there are people who like having money thrown at them. You can not apply capitalistic justifications to the users of casinos, as they are falling prey to a feature of humans People are not rational. The invisible hand is rational within a human framework though. You've picked one of the riskiest parts of an entire industry with that example, and certainly one of the most voodoo-ish. There are clearly people who are able to get good results in the market, but as the successful ones tend to not want to be studied too much, we still don't entirely know why there are people like Buffett out there who consistently do so well. That said, hedge funds are funded, for the most part, by wealthy investors who choose to invest in such things - when hedge funds go down these people lose their money and that's it. Now here's where you make the switch. You go from "hedge funds" to "banking", with the implication there being the entire FSI. That's wrong. Very wrong. You can criticise hedge funds all you want, so long as I get to criticise murders and executions guys at the same time - but these dudes form a fairly small part of the industry and tend to take part in stuff that, quite simply, none of us has anything to do with. The bulk of the FSI, which we do take part in, is nowhere near as risky and far less gamblish than you make it seem. Objective science says so in specific circumstances for a specific group of people under the right conditions over a specific period of time etc. etc. etc. I'm a scientist, and frankly calling anything involving human consciousness "objective" science is, well, dubious. The markets, on the other hand, naturally come to an equilibrium by the nature of their operation. Businesses operate to increase profit, and if you're throwing half your revenue at high flyers it decreases, unless these high flyers are, on average, bringing in more than they cost. While it is conceivable that they do not, this is a problem the market will inevitably correct for, as survival of the fittest most certainly applies in these circumstances.
It was a speculative figure and in no way exact, as my "or whatever it is" indicates. I'm quite aware of the real returns of well run hedge funds, and I'd be inclined to revise your suggestion a bit higher. Again...not what I'm referring to, but if you really want to talk about this, then I think repealing Glass-Steagall was probably one of the first instigators of this sort of behaviour. I've never underestimated what the result of the ratings agencies' actions were - it was a recognition of their little interest in rating honestly that allowed the CDOs to be taken advantage of. As I said in my first post in this thread though, people taking mortgages like their were are equally responsible for not investigating what their 105% mortgages actually entailed, especially when the information is out there. I know enough about the Federal Reserve and they way they go about things to know that anything they come out with is complete horse ****. As specofdust (IMO) rightly says, rationality in terms of commercialism and capitalism comes naturally. Economic behaviour doesn't adjust on blind faith and so on, like religion and your other comparisons do, it adjusts and settles based on millions of tiny actions, of which commission based bonuses are one.
I was actually replying to Nexxo's comments, including yours for context. I've edited my post to clarify
