I wonder if the people who believe that bonuses are just manna sprinkled aimlessly from heaven, as some disingenuous media outlets have spun it, also believe in the Easter Bunny?

People respond to incentives, this has been true for centuries.

Arguing whether incentives are properly aligned with the shareholders is a fair question, arguing that incentives cause lower productivity is dumb. Share options & commissions are ok, but bonuses are not? C'mon.

Just think of some of the contradictory messages:
Companies only care about profits
Companies enrich employees with bonuses, at expense of profit
Companies don't care about employees, always cutting jobs & costs
Etc etc

The courts are full of people trying to enforce contractual bonuses, the idea that these are loose & discretionary is bonkers. They are often contractual terms paid upon achievement of very specific kpi's.

I suggest it's worth actually looking at what schoolgatesmum's link says -
http://www.blog.rippedoffbritons.com/20 ... s.html?m=1

This might help the debate as it turns the discussion on it's head.

Instead of arguing over whether bankers bonuses should be regulated, it challenges the whole concept of individualised bonuses to incentivise performance, i.e. the whole assumption that bonuses drive performance is flawed.

Ever heard what Warren Bennis said about management versus leadership ? Mangement is about doing things right, leadership is about doing the right things.

Methinks we need more leadership and suggest maybe the real reason we had banks that went bust were the bonus schemes in the first place ?

Stuart

Very interesting debate, which has been framed in news services to provoke just such sentimentality with good pros and cons, but really not on the money, dare I controversially say.

As someone who has some humble exposure to the inner workings of the bonus culture, the argument is surely NOT about the size of the bonus, because in good times the cake is bigger to divide (that's just good old fashioned meritocracy working), but more about the structural flaws inherent in risk / reward systems.

We must not forget that excessive and self-vested risk taking (which brought capitalism to its knees in 2007-08 etc), and the exigencies to curb incentivisation is about why bankers receive bonus when they make money but why no disincentivisation if they lose money other than being sacked! In an "all or nothing gambit" behavioural science suggests we take the risk regardless of consequence - the pay-off is worth it!!! So indeed, the debated needs to be centred again and talk about retrospective 'clawback provision' when money is lost; that's closer to being on-the-money.

We all know that 'private profit (not just bankers!)and taxpayer losses (when music stopped)' was incurred in the last merry dance of the financial cycle. Also I'm NOT concerned about non-doms welfare because they act like 'hot money' chasing highest interest / exchange rate benefits; as they are a) priviledged minority (some stat suggested 116,000 non-doms in UK!!!) and b) their contribution to society and community in taxes or social inclusion is negligible as HNWI (high net worth individuals) can exploit tax shelters / loopholes and are often behaviourlly a clique-set.

We DO NOT want the bonus pendulum to swing fully the other way, but we must encourage UK authourities to ply firm and fair principles to aborhorent flaws in reward / risk values.

Mrs Contractor Mum, you make a very good point, that high earners are most likely to spend their disposable income on driving up property prices, or buying luxury goods which is no good for small business.

I think what the government needs to organise is some kind of public service announcement to encourage everyone (especially those with more money to spend) to support small businesses more. We also need to mobilise against companies which offer tax shelters for high earners. Whilst many of these structures are legal, they are certainly not ethical, especially not now when the UK needs every tax pound it can get. The government is trying to address the loopholes, but it sounds like it is very complicated and may take a long time to sort out. If there were campaigns against these unethical practices (much like the Starbucks situation was highlighted), perhaps that would get more money into the coffers.

Reading through this thread, many are talking about bonus payments as if they are coming out of your own pocket. These are private companies with shareholders who can vote how profits are distributed. As they are multinational companies, they can choose to pay employees elsewhere if they can't pay the higher bonuses in the UK. We shouldn't think of it as being "blackmailed" by the financial industry. They are not threatening to leave - they are answerable to their shareholders, and so if they are not able to pay what they believe they have to in order to retain expertise (and I think it is a whole other debate as to whether they indeed do have to pay these figures to keep the right people), they will have to restructure their operations to run the business and that may mean less money coming to the UK govt. in the form of income tax.

I actually don't work for a bank, but I studied Economics and have worked with various banks soliciting funding for public projects including providing mentor programs and apprenticeship schemes for Inner City teenagers from low-income families. Aside from the taxes paid, the financial services industry actually contributes a lot to the community in this way, as well as donating to charities, funding public projects (e.g the Olympics). They are not all bad or unethical - honestly!

The reason the high street stores were not bailed out is because everyone didn't have their life-savings invested in them.

If 75% of the banks in this country would have been left to fold, it would not simply have been a case of the banking industry 'correcting itself'.

People would have lost their savings. Pension funds would have been wiped out. Loans (including mortgages) would have been called up.

You, I, everyone, would have had to suffer far greater financial consequences.

I personally don't have an issue with bankers bonuses etc and I don't believe anywhere in my comments I have said that. As I stated, a bankers driver is to make money and as such, that is the way to reward them.
I believe people's concerns are as follows:
Should bonuses (for any company) be paid out when a company is reporting a loss I.e Lloyds TSB?
Why should the UK economy need to feel blackmailed by one sector threatening to abandon these shores and the loss of perceived revenue? It's exactly what the unions threatened the country in the 70's and after a period of downturn, the economy recovered and continued. It's a remarkable adaptability of this country to recover its economic storms.
People feel particularly agrieved at 'bankers' as a whole when there are other businesses trying to make a success, employ staff and contribute to the economy that are unable to get even small investment amounts from their banks.
Many people question whether the decision was right to bail out failing banks - in a truly capitalist model we should have let them fail and let the industry correct itself accordingly. After all, we never saw the government step in to bail out many of the massive high street stores that have disappeared.
People cannot see where they have got their return on investment for that bailout. All they see is luxury brands doing well which they don't purchase, house prices anywhere in the M25 going up, comodities going up as basic goods are traded for profit, their high streets being decimated and services that were once available to all being removed.
Now, this is not all the bankers fault and yes we are all grateful for the taxpayers out there but the financial crash of 2008 by these global financial centres is still being felt in the pockets of many today who had no control over that crisis hence the feeling of unfairness to bankers.
I'm sure you do a great job for your bank and plough lots of money back into the economy.

Well put dinosaur

schoolgatesmum, the "article" you are referring to is obviously satirical.

Whilst I can understand that it is desperately unfair to think of bankers getting paid bonuses at all while the rest of us are losing our jobs and struggling following the financial crisis - I do find it worrying that some of the parents on this particular chat are prepared to make such venomous comments about anyone who works in the banking sector as a whole.

As a parent, this thread at times makes for uncomfortable reading. We all want our children to be free of prejudice and exposed to other children of a variety of social backgrounds.

Also, however unfair we might feel that this situation is, we can't ignore the facts:
(1) The banks were bailed out, not as a favour, but because if they hadn't been bailed out the consequences for our economy would have been unthinkable.
(2) The banks have since repaid the money that was borrowed, and I believe that the government may have made a profit on the stock purchase part of the bailout, as now the share prices have recovered. Please correct if this is not true.
(3) If overseas banks do not pay British staff in bonuses, then the UK will not have the associated tax revenue (50%) of the bonus.
(4) High earners in any industry do contribute to the economy, not only in taxes, but in their spending. Some do have off-shore savings to avoid putting money back into the UK economy - and those are the people that the government should be trying to reign in.

So while it does seem desperately unfair that some are getting nosebleed pay packets at this time of austerity, and the media would like us to believe that is because the government is taking care of "buddies" in the industry. The truth is, that it boils down to numbers. Like it or not, we need the tax revenues from these pay checks, otherwise the situation could get worse.

schoolgatesmum wrote:So here's an article about how excessive pay is not a good thing. Would be interested in people's thoughts.

http://www.blog.rippedoffbritons.com/20 ... s.html?m=1

to be fair, not sure a "ranty polemic" actually counts as an article.

On Radio 4 this morning the chief executive of Standard Life say that "we need to get back to a savings culture". So, finally, one of these people paid so much money has realised that the debt culture they have been encouraging is the wrong one. Aren't these the same people who were sending me letters offering me big loans without knowing my circumstances?

I didn't get paid even 1/20th of their salaries (let alone bonuses) and I have been saying for the last 20 years that lending had got out of hand - can I have my bonus, please? I'd even like a bit of interest paid on my bank balance.

So here's an article about how excessive pay is not a good thing. Would be interested in people's thoughts.

http://www.blog.rippedoffbritons.com/20 ... s.html?m=1

But personally knowing 10, 20 even 100 people as opposed to one million people and the full UK banking sector (as the centre of the financial sector for Europe) are completely different.

I know people who have moved to Canada, Australia, NZ, Oman, Dubai and the US in a variety of high earning sectors, not just bankers (I don't actually know many bankers). I too have been offered fantastic jobs in Switzerland, France, Germany, Canada and Dubai.

I also know people who have moved here for high earning, bonus busting jobs from Australia, NZ, China, India, the States, France etc.

That is the joy of migration that people with specialist skill sets will be in demand globally, but I haven't seen the evidence of wholesale removal of the banking sector from London in the same way for instance the whole sale removal of the telephone services industry from the UK when that was outsourced. Am I wrong or has their been some macro shift of the financial/ banking industry that nobody mentioned?

Has Monaco, Luxembourg or Switzerland even got the capacity to welcome one million bankers plus their families in to their infrastructure?

@schoolgatesmum - just saw your earlier post that said if the banks didn't pay bonuses, they would pay corporation tax on their profits instead. Firstly corporation tax is much lower than income tax (24% vs 50%) and all businesses "manage" their P&L statements so as to offset liabilities against their profits so that they don't post as much profit and thereby reduce their tax liability. Furthermore, these are mainly foreign banks so they book the profits in the place with the lowest corporation tax (not UK). If they pay their profits out in bonuses 50% goes straight to the inland revenue as bankers working in the UK are taxed on bonuses and salaries at source through PAYE.

@Mrs Contractor Mum: I personally know people who have moved to Switzerland, Dubai, Monaco, Singapore and South Africa in the last 12 months as their effective tax rate in the UK was over 60%

@wasateacher: I totally agree that in a utopian society we would lower top end salaries and increase lower end salaries. But this is the real world. The investment banks are not going to pay bonuses or salaries to millions of people abroad who don't work for them. So who would pay for your proposed scheme? The tax payer? But how will the tax payer afford it if the top end people aren't propping up the tax income for the country?