Are Bankers Bonuses Justified?
The answer of course is never as simple as a yes or a no! The question comprises of a highly convoluted set of circumstances and factors that some bright academic one day might use to write his doctorate. Youll know who he is by the one who everyone will be avoiding sitting next to at a dinner party. First lets remove the political bandwagon from the question. Heres how I imagine a conversation went in either a Coalition or Labour Party PR meeting:  MP1 : We need more votes. PR Man: Well, OK what we need is something all the public are angry about then jump on that and promise to support them to the hilt and be equally angry. PR Man: Yes but their anger directed at someone other than us. PR Man: If the public see were as angry as they are and promise to change it, then yes. PR Man: Maybe but theyre too angry to notice. MP1: You just dont understand politics do you. Bankers witch hunt it is  I not suggesting the banking community are blameless in any way, shape or form. Some were reckless, in cases, some were greedy and had no proper self-regulation or forethought about the future. Some however were very good at their jobs and through no fault of their own found themselves in a global economic meltdown. So lets not drown them all just yet and burn them at the stake. The last thing I want to see is small children walking around dressed in smart pinstripe suits on Halloween. I could go on for pages and pages describing how bonuses can and cannot be justified. Neither of us want that! So Ill try and be as brief as possible, providing an simple overview. Firstly, the bottom line is that bonuses are performance related pay and part of the remuneration package in many different businesses in the UK and around the world. From call centre staff and sportsmen, to management, its an accepted part of many different professions. Now lets remove the amount of the bonus from the argument. Note, Im not talking justification yet, just taking the amount of it. The bonuses awarded to bankers are in some cases a huge amount of money to you and I, millions, some might say an obscene amount. (Or in my new currency: one Tamara Ecclestone bathtub) Its an amount that you and I can possibly only dream of earning. No, I dont think so. If thats part of an agreed pay package and comparable in that line of work then that in itself cant be wrong. A top footballer can earn 1 million a month. Yes. Maybe. No, its part of an accepted part of our capitalist society and its better than the alternative (another debate that we wont go into now). Im not suggesting that theyre the same thing or comparative jobs. I mean I have no idea how well a banker plays football probably really rubbish and so they would end up playing for Wolverhampton Wanderers. Lets take a different example:  Im the top call centre agent and have to achieve 100,000 sales in a year in order to get a 20% bonus of my salary. A few questions to think about there and banks have to be careful in future that their targets set for bonuses do not force or encourage reckless activity in order to achieve them. The governments around the world need to put into place more rules, regulations and controls to ensure the global banking crisis never takes place again. The banks in turn need to ensure that their bonuses and targets reward sustained stable growth and profitability. A bank is a business. A business is owned by shareholders. The directors of that businesses have a duty to the shareholders and to run that business profitably. It is the shareholders that have certain power and rights over that business and can, if there are enough of them call votes, if necessary to change that business. For banks such as RBS and Lloyds we all are now part shareholders. Yes we do, its our money invested in those banks. However the great economic genius of their time, my grandmother, once said dont cut your nose to spite your face.  The thing about a banker witch hunt is that they will often drown an innocent banker and one that could be the ideal candidate to get us all out of the crisis quicker and on the road to recovery. What people have to remember is if we want them to perform to the best of their ability we have to offer incentives, like their competitors will be doing. If we dont do this and in some cases publicly force them to give up their bonus, then, like workers in any businesses, like you or I, they will look elsewhere and we will end up with the average mediocre people running our banks instead. In hindsight perhaps not but we must move forward. We have to reward those who will use their intelligence, knowledge and experience (including lessons learnt) to safely take the banks back to recovery. So before we cry out how unfair it is that bankers should get such high bonuses when we are struggling, we need to also think about the ramifications of not rewarding them. Image reproduced from news.sky.com   2021, City Connect News. Copyright Notice & Disclaimer are below.