Should any staff at RBS get a bonus?

[Zak33]

If a company is doing well, staff get paid bonuses, if it's not, they don't. RBS is not doing well.

Remember this is a 'bonus', something you get for performing above average either as an individual or group, not for just scraping by.

ok, without being a Saracen mega post:

Not all parts of a single company is run in one way.

Where do you work? Do you have different departments? If so, and I do and I'm sure many people do... one department can be making massive losses and anothe rmassive profits. If the overal all result is that the company is losing money, do you then penalise the good dept for making money by not paying them any bonuses and yet not reduce the other departments salary?

Some companies have (GM for example reduced everoynes working hours by 10% and salary by 5% all of last year) and it hurt a lot of family's. But in that case, the entire car industry had crashed and burned. However, the people doing GOOD things had LOWER bonuses..not NO bonuses.

Lets take a small company: It buys things in, makes them into something else and sells that new product out.

The bloke buying the raw product/items into stock, gets a better deal for the items's he's buying and not only lowers the overall costs of it, but gets increased quality. He should get a bonus for getting a better deal.

The bloke in the "creation" deptartment invents something new to make with this better product, but he himself has no commission as he doeasn't but or sell anything. Hopefully he'll be on a profit realted pay deal of some sort for his new idea.

The actual labour force on the factory floor make the items in record time, with a new process they've invented which makes them more efficient. Sadly this means they need to get rid of as member of staff as he's not needed anymore, but the company is now more profitable and the rest are all ok.

The sales bloke then totally fails to market the items, over promises and under delivers to the clients, and then fails to package the items properly when they're dispatched and loses the companys all the profit and more.

Net result: company loses money.

Do we now reduce the commission of the buyer to zero and cut back the profit related pay of the creator to zero, take away the effiency bonus of the factory workers and makers of the item?

All because the Sales team are a bunch of wasters?

OR... do you continue to pay the buyer his bonus because he's properly dealing and already looking for better deals?

A bank is not one collective. It's one of the most complex businesses of all... and just because WE'RE not making 60k, or 100k, or 250k per year doesn't mean we should reject them from doing so, if they're good at what they do?

Greed is good... but jealousy is bad.

[jim]

That's one of the main things I haven't really understood about this whole crisis.

Everyone keeps going on about "bankers". What the hell is a banker?

I noticed that when the bonuses were announced at one bank everyone went mental, despite the bonuses being noted as going specifically to branch and office staff. Quite what my bank manager or the lady at the call centre have to do with the crisis I don't understand.

Further on from that, why you want to blame someone who earns £1m bonus a year for stock trading doesn't make sense to me either. Did he not have a boss? Did he personally decide how much risk the bank would like to take this year?

But from day one there's just been a blanket term of "banker", which seems to cover, depending on context, either anyone who works at a bank, or anyone who works at a bank and earns more than Gordon Brown.

[shaithis]

All because the Sales team are a bunch of wasters?

Why employ a sales team full of wasters?

RBS as an entity made mistakes that should have caused them to collapse. They should not have been bailed out. Now that they have, they have to prove that they can move forward correctly, until they do they should not be paying anyone a bonus.

If the people within RBS cannot understand this, then they should go elsewhere.

The fact that the people expecting/wanting bonuses either cannot see this, or maybe refuses to, further fuels my annoyance at the fact they were bailed out.

Just how many people in the UK were made redundant because of the banks mistakes? Perhaps those seeking bonuses on top of their £100k+ salaries should take a moment to put things in perspective........and also to realise that the UK tax payer are majority shareholders!

If they do not like it, they are welcome to buy the 84% (or whatever it is) of the shares back and do what they want!

[Rob_B]

That's one of the main things I haven't really understood about this whole crisis.

Everyone keeps going on about "bankers". What the hell is a banker?

Very true, people really need to distinguish between backoffice staff & people getting payed £1m. Does someone earning under the national average wage getting a £500 bonus really matter? Strip one top guy's £1m bonus & pay 1000 other staff a £1k bonus, I imagine that'd go down better with the public.

I (and 99% of the public) simply don't know enough about bonuses/contracts/need for paying huge sums to make an informed decision on the OPs poll so I won't vote but do steer towards the 'No'.

The problem is that no bank wants to be the first to not pay them, it'll take sheer guts or force to do so, once someone does I'd imagine all banks would quickly follow suit & things would settle down to more acceptable levels. Maybe the UK tax & Obamas' plans will accomplish that, fingers crossed.

[TheAnimus]

shaithis, its simple.

The tax payer owns 80+% of RBS (I don't have my own BBG anymore so can't be exact, but i swear its over 80%).

So the tax payer wants it to do well.

A bank is a collection of 'desks' each desk works in different areas. Would you believe the whole failure of RBS was pretty much caused by one desk? So there was a chronic failure in senior management, in risk control and in regulator oversight.

Now that leaves many desks which where OK, and some which actually did VERY well.

Should those desks which have done well, and provided VALUE to the TAX PAYER, not be rewarded? It is not as if it is going to be tax payer money spent on desks that have lost money. (see exception below) Only on those desks which have turned a profit, even then its normal that it is only 10% of the profit at the very very most which goes in to the bonus pool.

It is pure and simple capitalism, that if your on a desk that is profitable and you can demonstrate that you helped generate the money, you will get a job at one of the other banks that will pay you more if you don't get a bonus.

Last time an agency found out that I had found my bonus 'un-satisfactory' it was 3 hours before I had a job interview. I was just a disposable tech grunt, nothing special, i'd not been making trading decisions. Last time I was working with a desk that was round down (head retiring) two of the smartest people I've ever met where effectively fired, one of them had a new contract in the hour. The reason why people get the hudge bonuses is because the demand for people is VERY high.

If you don't pay enough you won't get it, many people are capable of working in the city, but choose not to (because its really quite awful). I couldn't take an 'exciting' offer that was double my salary at the time because I didn't think I could take the stress, and the extra money simply wasn't worth it, what's the point of having money and no life after all. When they offered more than double well, that changed things a bit. (In the end I got black balled for that job afterall!)

So if you don't pay the profitable desks, they will leave, and RBS will just be a toxic waste dump. Some in the industry believe this has already happened, as people have no faith in brown, and think cameron is too populist to let it happen.

[TheAnimus]

Very true.

I (and 99% of the public) simply don't know enough about bonuses/contracts/need for paying huge sums to make an informed decision on the OPs poll so I won't vote but do steer towards the 'No'. The problem is that no bank wants to be the first to not pay them, it'll take sheer guts or force to do so, once someone does I'd imagine all banks would quickly follow suit & things would settle down to more acceptable levels.

afraid not.

If all of the banks reached a uni-lateral agreement to not pay bonuses, this is what would happen.
A bunch of very pissed off traders would simply retire. Investors would see less return on their money, and redeem, going to simple gov bonds. Stock prices of the banks would fall. Some might actually approve of simplifying finance, derivatives trading is risky when doing things like simply trading vol (this is the area I used to work in).

However, greedy investors, pension fund managers and the like wouldn't be satisfied with the 0.5% they would receive (right now anyway) and they would turn to Hedge Funds.

Now hedge funds might have all agreed to the whole 'no bonus' thing too. But someone would start a new one, its not hard, you only really need $100M to get going.

That one would pay bonus, take more risks and all of a sudden you would end up with a much worse situation.

To invest in a hedge fund, due to their dangerous nature you need to be a professional investor (asside: I always think of the 80s idea of a card shark.....) so ma and pa would be out of it.

So the rich would get much richer and the poor wouldn't be able to play. Nice eh?

I find it funny how with only a basic understanding of economy and history, most ideas put around by socialists, such as the no bonus thing has been for the last few months, will almost always in all probability increase the gap between the rich and the poor.

[Rob_B]

So the answer is....?

There's the problem.

[malfunction]

Net result: company loses money.

Do we now reduce the commission of the buyer to zero and cut back the profit related pay of the creator to zero, take away the effiency bonus of the factory workers and makers of the item?

All because the Sales team are a bunch of wasters?

OR... do you continue to pay the buyer his bonus because he's properly dealing and already looking for better deals?

If the company doesn't have the cash or is being put in jeopardy by the losses made then yes you have to reduce or remove the bonus of people who deserve it and possibly even make people who are very good at their job redundant because the core of the company stands a better chance of survival if the head count is reduced.

Of course one way to avoid making cuts / to help save the company is to seek outside funding and if this were a private loan / equity stake I doubt it would be making the news. But it's not private money it's public money and like it or not public money comes with public exposure and public opinion. Which is probably one of the reasons why other banks (e.g. Barclays) sought out other routes. Personally I understand the fact that the government wanted to limit the impact on the economy but if a *bank* can't get it's financial affairs in order by itself (however bad the attached T&C's would be) does it really deserve bailing out by the public?

The key argument for me - which I do not know the answer to - is whether or not the money pumped into the banks is in the long run better for the economy than equivalent financial support of the bank's customers / assets rather than the bank itself. I also feel that a US like solution - limiting what the board can reward themselves - would improve public opinion without affecting the average person working in the sector that isn't creaming it in. The strange thing about all of this for most people is that we seem to be fine with the idea of any other kind of business being forced to stand or fail on its own merits (coal, car industry, etc) but people that shuffle money around are somehow exempt from that because it's presumed there will always be a demand for them and that it's better to prop them up than let them fail and allow the remaining banks to pick over the remains... Again - would the money pumped into the banks have been better spent supporting the customers / schemes while letting the bank itself fail? And how do you separate it out? If you need to pump money in to support various funds (e.g. pensions) is that really any different from pumping it into the bank and allowing the bank to run itself and make its own money?

[TheAnimus]

Maybe the UK tax & Obamas' plans will accomplish that, fingers crossed.

I'll separate this out here actually because I think its worth its own post.

The UK's tax plan is stupid. It is taxing people who have done well (ie earnt a lot of money).
It promotes failure as a result, encourages people to work less. There will be plenty of people who had nothing to do with 'the mess' who are now taxed punatively as a result. Certain sales people in the tech industry (like an ex of mine) who earn a low basic are going to get taxed as if they where earning 'city money'.

Thats great, hurt people who try hard. That is exactly what we've come to expect however over the last few years.

Now Obamas is a bit differen't, and I quite like the idea (thou I've not given much thought or read much analysis of how it will *really* work).

There are different kinds of banks, there are the Lehmans of this world, and there are the deposit banks of this world.

Deposit banks take little risk and cover all of their own investments, that is to say they don't borrow a penny, and will never need too. As such they will never need a bail out from the government.

However deposit banks also earn less money, so therefore generate less taxable revenue.

Investment banks like Lehmans on the other hand borrowed massive amounts of money, they then invested the borrowed money because they thought they could do better than the other people, they thought they had better insight into certain markets etc.

Now that could well have been true, some investment bank entities have made a good stable return throughout this mess, but some might need bailing out.

Obama's plan is to tax based on how much money a bank has to borrow. This is good because those who borrow more are more likely to have to be bailed out by the fed. Its almost like a government insurance policy.

This is better than simple regulation because all of a sudden the government has an incentive to tax the risky people more. Where as if you worked for say the UK FSA you would earn less in a junior roll than you would in a bank, if you have an organisation that makes money figuring out how the banks are been reclass, kind of like an analysist should be doing but with instant reward (ie they get to tax more).

All of a sudden you have a good risk reduction method, which will be able to attract and retain good people (because of the money opportunities).

It only taxes those who are exposing the government to risk, and doesn't directly effect individuals who are 'innocent'.

At the moment it sounds like a good plan..... I wonder how they will manage to screw it all up.

[shaithis]

It is pure and simple capitalism

We are talking about a company that was BILLIONS of pounds in debt before we bailed them out. They completely and utterly screwed up on a monumental scale......yet they didn't get what they deserved.

How does that fit into your capitalist view?

The way they were kept afloat would have been much more fitting under a communist regime.

[TheAnimus]

I really don't like it, and I think that in many ways they should have been allowed to fail.

The problem is the nock on effect of lehmans showed had bad an idea that was in the first place.

It was in no way an ideal solution, but it was a better option than default.

However the actions of one bail out, do not mean people break out the hammer and sycle and that all capitalist practices stop. If your profitable, and been paid less than market rate, you will get a job somewhere else, often before the end of the day.

[Rob_B]

I'll separate this out here actually because I think its worth its own post.

The UK's tax plan is stupid. It is taxing people who have done well (ie earnt a lot of money).
It promotes failure as a result, encourages people to work less. There will be plenty of people who had nothing to do with 'the mess' who are now taxed punatively as a result. Certain sales people in the tech industry (like an ex of mine) who earn a low basic are going to get taxed as if they where earning 'city money'.

I was under the impression the plan was to tax the company on the employees bonus so the employee wouldn't actually be stung & the government would get their share of the employees' tax/NI + the 50% from the company?
To be fair I've not been paying attention though

[TheAnimus]

Yes because all companies sit on stockpiles of cash just waiting to pay tax.

This is my complaint that it targets all companies, and therefore smaller companies and small people.

Plenty of small especially startup companies that are fairly sure they are going to make good money don't want to sell too much share and are cash constrained as a result.

So they will often 'gear' their staff, their sales teams in particular quite highly. Often far more than 2 times. So they will get a low basic, and a bonus twice that. These people will be, I think its fair to say un-fairly hit by this type of tax.

Its classic new labour shafting the small people (often via the small businesses.... do you know how complex the tax has become, the added costs to small companies, sometimes i think the FSB should be militant.............)

[Lucio]

Unfortunately, whether you like it or not, the people working at the banks aren't *all* responsible for the problems. Many of them have their bonuses in their contracts and it'd be a huge headache to resolve all the court cases that would come about for not paying them out.

The banking crisis is far too complex to be judged by popularist opinions and policies, what needs to be looked at is both what is practical (can the country afford the bonuses vs the costs of the court cases?) and what is fair (have the people involved really earnt their bonus by achieving the stated goals)

[j_r_f]

Mixed feelings on this, but on balance, no.

The huge losses were suffered by certain parts of the business. However commercial organisations are driven by profit. Every company I have worked for based bonuses on its overall profit, not on a by department basis. A year loss = no bonus, continuing/large loss = redundancy.

In this instance a company with huge debts was saved by the taxpayer and payback of this should take precedence. Profitability and related bonuses cannot have such a short term memory that this is forgotten or discounted.

[Steve A]

provided VALUE to the TAX PAYER

Not meaning to sound ignorant, but what would you class as Value to the tax payer exactly ?