Greedy Bankers Bonuses - A Question

[barney15c]

Could someone explain to me how some senior bank officials are able to negotiate bonuses in their contracts when they are not related to performance / targets or for anything else at all its just supplemental to their salaries. What the hell are they for??? This has come up with the news that some bankers will be getting their bonuses because their employers are contractulary obliged to pay them irrespective of the fact they are being rewarded for failure. Even now the true colours of the bankers despite being bailed out is being shown. BTW I have no problem with bank cashiers etc getting bonuses as they get paid little enough as it is.

[buildersmate]

I don't think we've heard the whole story. I, for one, will be surprised if individual contracts have a clause that pays a additional amount of salary merely for maintaining one's employment with the organisation over a period of time.
Which can surely be the only interpretation here, since 'financial performance' is non-existent.

[VHG]

Good top business people tend to be thin on the ground (GOOD ones) and they tend to be head hunted when people are looking for a new "boss".

To get these people to come you often need to offer them a good package (or bribe them for want of a better word).

This can often include salary, bonuses, large pension contributions etc.

These "perks" are often paid irrespective of how well the company is doing.

I worked for a large internatiional company for a few years, and they head hunted for a new boss.

One of his "perks" was that (if still in the job) he would be paid for six months after he died (the rest of us stopped geting paid the minute we died).

I am afraid it is snouts in the trough for top business people.

[sandmaster]

To be fair to the Lloyds execs they are probably entitled to their bonuses as the problems in the Lloyds group stem from the takeover of HBOS - which was at the behest of Brown. It has certainly not been favourable to the Lloyds shareholders.
Having said that, I think these bonuses are far too high and not properly controlled. Their salaries should be enough to expect them to do the job.
There must now be justification for a higher tax band.

[Supernick]

It's not just the big people who are bonused. I don't work in banking, work for a modest salary of 28k, but when I started my job I negotiated a fixed bonus into my salary for several months, irrespective of perfomance. If you're good, and they really want you, they'll pay to keep you. They really wanted me, were worried that I might go for another position elsewhere, and so they offered me a better deal. That's just how it is in business.
Now I'm not saying it's a bit of a choker to see bosses who are presiding over the financial collapse picking up huge bonuses, but legally they're required to be paid.

[foxspur]

Just tax anything described as a bonus over say �5000 at 100%. Then they'll have to renegotiate their contracts. And, btw, please don't use the words "talent" and "bankers" in the same sentence.

[The Sherman]

not accusing anyone here but it is amazing ho soicialistic everyones views have become in the past year -Go Communism!

[anotheoldgit]

The Goverment still refuse to cap these bank bonuses, even against the wishes of the opposition parties and some on it's own benches.

http://www.independent.co.uk/news/uk/politics/ government-rejects-call-to-cap-every-bank-bonu s-1604488.html

The Goverment claimed efforts to turn round the ailing banks would be hampered if bonuses were capped. "These banks would simply not attract the best people, who would just go elsewhere,"

If those who receive these obscene bonuses, are these so called 'best people' why did they get in the mess they are now in?

[ethandron]

The losses at the banks are mainly from one small (in terms of staff numbers) division of the Bank. The other divisions of the banks are in profit and therefore the staff are quite rightly eligible for bonuses. The people who should not get any bonus are the board directors and the small number of staff who made all these losses.

[McMouse]

There is focus on City bonus payments because of the current economic crisis. However "corporate" bonuses have been paid for years and have generally very little to do with actual real results and performance. This is the way it works..........or certainly does for my organisation.

All senior employees from CEO down to management grades are given a bonus opportunity of say 20% of basic salary. Actual bonus achieved will be based on the performance of the overall organisation (50% of your bonus potential). Next 30% based on performance of the country/division you work in, final 20% on departmental performance.
The corporate trick is to define what performance means at the various levels. So if the overall organisation achieves a pre-determined annual growth rate then the first 50% is secured. This growth could be the result of just getting bigger through merger or acquisition........not by being efficient. Country/Division (30%) might be based on maintaing a low headcount to turn-over ratio. Hence wide ranging redundancies in fourth quarter. Departmental (20%) bonus will be based on some extremely achievable goal.........such as bringing a project in on or under budget.
The corporate reality is that the departmental 20% is always achieved. Country/Division usually gets close to or achieves 30%. Corporate 50% is real and exposed to shareholder scrutiny and will ultimately depend on annual posted results.
In 25 years with my organisation I have always achieved at least 50% of my personal bonus opportunity because it is a corporate fix!

[barney15c]

Mc Mouse, thanks for your detailed answer regarding how bonuses are arrived at in the corporate world.
As i said i have no problem with employees at the lower end of the scale and those who genuinely contribute to their businesses, however what i really object to is the obscene bonuses awarded to the top brass (RBS's �4m bonus to its top man last year a case in point). For someone to expect this amount for catastrophic failure goes beyond the pale, and shows they really havent no perception of the misery they have caused.

[fredpuli47]

Interesting and informative (if not surprising!) McMouse.What might be added is that shareholders , in reality, don't present much opposition to big salaries and bonuses in major quoted public companies, of any kind. It's not hard to see why. first,when these are put before an ' independent' body, as may happen, to recommend or approve the pay structure, that independent body of advisers consists entirely of executives and directors of similar sized companies, who , amazingly, tend to approve (and the same happens when someone similar e.g a boss of the reviewed company, looks at their pay) Second, of the big companies' shareholders, the ones who own by far the greatest shareholding are themselves big corporate bodies of one kind or another. Their bosses and financial leaders are paid very large amounts and have similar pay structure. They are not likely to vote against similar generous arrangements in the companies they have big shareholdings in.

[fredpuli47]

By the way, apart from the government not wanting to force companies, by law, to revoke existing clauses in executives' contracts, there are certain other practicalities.What's to stop multi-nationals stopping the bonuses here and paying the employee the same sum abroad, as their 'man in the New York (or wherever) office', whilst retaining him here in the UK and paying the allowed salary for his work here?

[McMouse]

Regret to say that corporate remuneration committees spend a great deal of effort in disguising bonus criteria to make them look difficult to attain. In reality it's often the opposite. The reason for this deceipt is that shareholders would never approve base salary levels if the so called bonuses were included. In my view it is dishonest and the sooner governments clean this up the better. Mind you, governments need to clean their acts up too!