Should any staff at RBS get a bonus?

[TheAnimus]

So RBS are looking to define the bonuses late feb.

My question to you the great Hexus unwashed is should they get any bonus?

Now this question isn't based in a perfect world with your perfect morality but as a taxpayer who owns a large chunk of RBS should they pay any bonuses to the staff?

If no, please explain what they should do to keep staff? They are already it would appear paying over the odds, this would make sense if few people wanted to work there. Knowing people who do (and having turned down the offer of interviews myself) they wouldn't be there if:

A. They could be elsewhere (ie they're not that good)
or
B. they are getting paid loads (not just as contractor but also good permie rates).

So if you say no, why? Do you feel RBS is a stop loss and should just be closed down, rather than invest in the staff. Do you feel bonuses should be paid entirely in stock or something rather than cash (plenty of senior people are paid bonus in options).

[Phage]

They are already it would appear paying over the odds...

What's your source for that ? I may apply...

[abaxas]

The business was insolvent and would be without state aid (both uk government and BOE)

If they are happy to remove all state aid and no longer use the BOE. Then then can pay what they like.

[dave87]

I'm in two minds.

Firstly, if I were a potential investor, I would argue that though the route to profitability is potentially by hiring and retaining the best people, that only makes sense if the bank is able to exist past the initial and current financial problems. Whilst I would argue that bonuses are such a minor portion of their capital expenditure, it does suggest a mere vulturism amongst professionals - a necessary evil of capitalism - however not an admirable trait if there is any attempt to maintain stability and ensure longevity of the banking system in its current form. So if the drain on resources is such that it then requires further support from the tax payers, and the only reason such decisions are made is due to the high risk/high reward character of the people they are now hiring, it does beg the question as to the more stable route to profitability being the more admirable.

In terms of the wider social responsibility to maintain the existance of banks, and not let them fall and potentially exaggerate the political and economic repercussions such a collapse would ensure, that would help to promote stability (rather than boom bust that short term but lucrative decisions could promote). However, if I were looking in terms of purely personal profit, I would argue that the benefit of taking the riskier decisions and the payment of high salaries and bonuses are the way to go, as it is potentially better a route than the stagnation and eventual collapse that would ensure. So the question then becomes run the risk of a catastrophic financial failure, or run the risk of stagnation?

As a potential investor, the warning signs of a catastrophic failure may be more evident, and the timeframe for any significant shift in the share price more sudden, both up and down, whilst stagnation with the hope of recovery is unlikely to do the economy any good, nor attract the much needed investment in British Banks.

As to the principle of offering such large bonuses to the people that arguably over extended the financial institutions in the first place (unwittingly or not) is questionable at best.

(and in writing this and thinking it through further than my gut response on the issue, I'd be swinging to the yes camp, rather than no as I initially voted)

[jim]

I honestly don't understand this whole situation.

The numbers are frankly ridiculous if you look at it as an outsider. But at the end of the day banks are there to make profit - and they are there today because they are, generally speaking, very good at doing that.

So why on earth they'd pay excessive bonuses "just for the hell of it" I don't really understand. They're doing it because as far as they're concerned, those bonuses generate them profit that outstrips them. Consequently, they should do what they want.

At the end of the day, if we wanted them to change their ways we wouldn't have bailed them out - they would've gone bust, and set a massive precedent to all investors that followed. Clearly that's not the case, so it will continue.

[TheAnimus]

What's your source for that ? I may apply...

Talk to ANY of the agencies, I shan't name names for obvious reasons!

Dave, what is interesting is you tar everyone with the same brush. Certain low vega traders will be paid more of a bonus than those who have made more money but had a higher vega.
(note: this is not to suggest for a second that the greeks can be used as a fool proof risk limitation system)

As such the notion that the more risk was taken to get a high bonus is often false.

But good post to justify a no!

[Salazaar]

So the main argument for giving out big bonuses even in the face of poor performance is that all the qualified staff will jump ship, but has anyone ever tested that supposition?

I say withhold their bonuses and see what they actually do. I don't know what the job market is like in that sector but my gut says that far fewer would leave than expected. It's even concievable that it could initiate, if not a sea change, then at least a shift in the way the sector operates.

[shaithis]

No, they shouldn't.

They got into a huge mess and expected us to bail them out.....why should the British public be massively out of pocket, while these guys get nice phat bonuses?

It isn't right and if they don't like it, they can quit. Plenty of people would be more then happy for their jobs right now........and if there was a walk-out en-mass, what would be the feasibility of buying out the rest of RBS and nationalising it?

[dave87]

Sorry, I wasn't equating bonus with risk, rather the potential profit from any given transaction with the inherent risk of such a transaction. Ergo, as the situation got worse, the potential exposure to higher risk transactions and the profit they generate, to cover the lesser performance of other, safer, investments. I was also linking, by assumption, that those who are paid to turn around a bank are more likely to participate in such transactions.

As such, if those riskier investments then turn out to be as risky and as potentially loss making as they could be, then they exaggerate the downward spiral. Ergo this would the time for safer, more conservative investments to dig the institution out of the hole it is currently in, and once they had returned to profitability then they can carry on in whichever fashion they deem in the best interests of their shareholders?

Or, to put it another way, to balance the risk elements of their investments and trading portfolio in a more conservative manner than has been the norm amongst such institutions in the relatively easy trading environment a boom brings with it.

What I wanted to point out, and avoid, either by bonus or pay structure, was the reliance on a smaller number of highly profitable, yet inherently risky transactions to maintain the profitability of such an institution - eg Barings Bank & Nick Leeson's desparate attempts to reign in the losses through inherently risky transactions out of desparation.

[TheAnimus]

The business was insolvent and would be without state aid (both uk government and BOE)

If they are happy to remove all state aid and no longer use the BOE. Then then can pay what they like.

And this is the problem we have with capitalisim.

For it to work the people who have the money invested need to understand what's going on surely? Its a case of buyer beware, the buyer keeps the seller in check forcing them to work better.

Yet plenty of the investors just don't bother, in this case the state aid was the state buying chunks of the bank.

As such the state should want the bank to be worth more, be profitable as well as stable. So if that's to happen surely they need good staff?

Whilst there are undoubtedly some in the city who have their job because of old boy network (Tony Blair's sprog for instance) rather than ability, the vast majority are just in a meritocracy (one that does require you to not just be good at your job but a bit of a poletition too).

So if we stifle the business they won't be able to get good staff and they certainly wont recover. That said the new owners should make sure everyone knows there are major changes happening and previous reckless behaviour will not be tolerated (ie buying a certain ABN!)

[ajones]

Staff working for companies doing well should receive a bonus if it's an option. However, how can they argue that RBS are doing well when they've just been bailed out?

There are more ways to attract staff than through the pay packet. Working conditions and benefits etc. Whilst there is an arguament that you have to invest, once you've set a precedent and have an overinflated wage bill, you are screwed and have to be faced with some very difficult choices in order to turn it around.

[TheAnimus]

No, they shouldn't.

They got into a huge mess and expected us to bail them out.....why should the British public be massively out of pocket, while these guys get nice phat bonuses?

It isn't right and if they don't like it, they can quit. Plenty of people would be more then happy for their jobs right now........and if there was a walk-out en-mass, what would be the feasibility of buying out the rest of RBS and nationalising it?

You clearly have no understanding of 'the mess' or who is responsible. A bank will have many areas of business, and MANY legal entities there-in.

One of the main reasons RBS lost money was a certain acquisition which barcap is so damn lucky to have dodged.

There are many traders and even desks who have made money, and not lost a penny, who have helped bail out the other side too.

Some of these have already walked (I know some of em professionally) some haven't yet mostly because they fear been tarred with the RBS brush.

So your saying that they are all to blame, and that profitable areas should receive no bonus because we don't want them to continue making money at all as punishment.

[TheAnimus]

There are more ways to attract staff than through the pay packet. Working conditions and benefits etc. Whilst there is an arguament that you have to invest, once you've set a precedent and have an overinflated wage bill, you are screwed and have to be faced with some very difficult choices in order to turn it around.

A good junior trader will have a basic salary of 80-120k depending, in plenty of institutes they are then able to earn anywhere from 30k-350k in bonus.

A good developer will be earning 70-90k with a bonus of anywhere from 10k-50k on average depending on how close to the front office they are.

Working conditions are sh!t. Its long hours and high stress because there is a chronic shortage of people who are able to understand everything required.

If your not offering them money, what is it going to be? Hookers?

[BUFF]

if they are contractually obliged to pay bonuses then they should.
Also afaik the vast majority of staff won't get the massive amounts bandied about by the press that only a relative few are in line for.

[Salazaar]

If your not offering them money, what is it going to be? Hookers?

That would be one way to alleviate unemployment at the other end of the scale... Win-win

[CAT-THE-FIFTH]

What is the point any more whether we like it or not?? Its not like it is going to change anything??

So many areas of the economy such as Science research which are dependent on government funding are having huge budget cuts meaning many people are out of a job or soon are going to be out of one.

Thousands of bank jobs have been secured as a result of government intervention and now these people are whinging since that they cannot get their bonuses. If the stupid banks had not got help even some of the jobs at the profitable areas would have been under threat too.

Plenty of people have had their pay increases curtailed or stopped in other parts of the economy and these companies and institutions have had little or no government help. These people work as hand as anybody in a blooming bank and are even more qualified in many cases so I don't give a toss whether bank people are happy with their bonus. Many people have to work long hours and under short term contracts and very stressful working conditions in other sectors so people in the banking industry should not feel sorry for themselves either.

Banks like Barclays have done it their own way without scrounging that much off the taxpayer and hence they are free to pay whatever they want and rightly so.