According to a radio report, John Lewis (and therefore also Waitrose) staff are to receive a 17% bonus, equivalent to about 9 weeks salary. And it's based on performance. And in my opinion, well-deserved .... and no, I do not and never have worked for them.
But it seriously makes me question this latest EU move on bonuses. While I don't like vast bankers bonuses any more than anyone else, I can't see this EU cap working, and indeed, but could well be counter-productive.
First, if you cap bonuses, all that will happen is that base salary will go up to compensate. What they get paid will still be market-driven, and if bank A doesn't pay it, bank B will, and the rainmakers will leave A for B.
Secondly, bonuses are (in theory, at least) performance-dependent. If you increase base salary and reduce bonus, you actually decrease the link, and decrease the ability of the bank to reduce costs in bad times by reducing bonuses. The other obvious option is to cut staff. So who gets fired? Profit-generating traders, or the poor working Joes (and Janes) in admin, or branches? Yeah, quite!
And third, in this changed environment, you stand some chance of clawing back bonuses, especially non-cash bonuses like trade-restricted shares or options. But if it's salary, I'd say the chances of any clawback are exactly zero.
All told, the cap strikes me as populist political posturing and grandstanding. Much though I'd like to see banks sorted out, this cap strikes me as a daft way to go about it, not least because I do not see it working .... unlike the John Lewis scheme.


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