Should Traders at RBS/HBos/Lloyd be paid Bonuses? I say Yes.

[seaninog]

Friends,

I know this is a controversial viewpoint but let me explain. There are two reasons why i believe that as a Taxpayer we should pay the top Traders at the (part) nationalised banks.

1. Any Trader/Banker currently in line for a bonus has not only made money for his/her bank but in doing so has performed above expectations. As a result their efforts have, in fact, lessened the current crisis. Like any business, such performance, especially in such adverse conditions, should be rewarded.

2. However, though I accept there may be debate around point 1, I offer it merely to provide context. The key point for me in this debate is that of staff retention. If I run a business (and as the Taxpayer, I now do run one: a bank!) then the most important thing to me is to retain quality employees. Any Trader/Banker that has done well in last year's market conditions is likely such an employee so I should, as a prudent businessman with a view to growing my business in the future, pay what the market demands I need to pay him/her to keep him/her. The fact that we, as a society, may not approve of the size of City bonuses is actually irrelevant. As long as that culture persists (and changing it is a whole other debate) then we need to abide by it or through the simple economic laws of Supply and Demand we will lose our best staff. For the nationalised banks to fail to pay bonuses for 2008 will mean they are bled of their best staff and we, the Taxpayers, are left with those staff who performed averagely or poorly to run our investment, As a Taxpayer and as a Businessman I cannot allow this to happen.

A lot of the debate on this topic in the media has predictably been one-sided. It is very easy to jump on a populist Bandwagon and demand that Traders/Bankers get no bonuses. Much of this debate is fueled by both ignorance and envy. The reality requires taking an uncomfortable look at the facts from an economic perspective. Wehave a business to run and it is essential for its long-term health that we pay these bonuses.

I'd appreciate some discussion on this topic. Am I seeing this correctly? Have I missed something? I will certainly keep an open mind and look forward to hearing opposing arguments and debating accordingly.

Regards - Seán

[JonX2C]

Yes.

IF they dont they will all walk away very soon and not bother coming back to work therefore causing more problems in the Finance world as there will be no traders.

[Vipers]

Does average Joe Public get a bonus, no he doesnt. Why should the likes of bankers on lots of dosh get one, they are just doing their job same as evryone else, and being paid for it. (At times, it seems obscene amounts of money.)

[plasticpig]

If the bank are contractualy obliged to then yes. If the bank feel it provides the best value to their shareholders (and the shareholders feel the same) then yes. Otherwise no.

[sgrimshaw]

JonX2C said:

Yes.

IF they dont they will all walk away very soon and not bother coming back to work therefore causing more problems in the Finance world as there will be no traders.

Do you have any idea what these people are paid?

They aren't about to walk out - where would they go, this is a Global Problem not a local one limited to just a couple of Institutions.

[Smiler.]

No. Surely all the fantastic profits made were actually a lie. The money is not really there, it never was. What's the word I'm looking for....Fraud, that's the one.

seaninog said:

....If I run a business (and as the Taxpayer, I now do run one: a bank!)......

Are you CEO of a bank?

JonX2C said:

Yes.

IF they dont they will all walk away very soon and not bother coming back to work......

Where will they all go?

[seaninog]

Vipers said:

Does average Joe Public get a bonus, no he doesnt. Why should the likes of bankers on lots of dosh get one, they are just doing their job same as evryone else, and being paid for it. (At times, it seems obscene amounts of money.)

Thanks for your input Vipers. However, I am of the view (as stated) that the fact we don't approve of the nature/size of the bonus culture is irrelevant. It's an industry standard and as long as it remains so (and that, as I said, is a whole other debate, separate for now) then we have to abide by it. In the same way we wouldn't take over a Construction firm and dictate when people should take their holidays (as it's an industry standard), we can't single-handedly go against this culture either.

Incidentally, the reason it exists is that these individuals make far more money than Joe Public. It's a percentage of profit made and in that sense entirely "fair". The more they get paid means the more the bank has made out of them in the first place.

[JonX2C]

sgrimshaw said:

JonX2C said:

Yes.

IF they dont they will all walk away very soon and not bother coming back to work therefore causing more problems in the Finance world as there will be no traders.

Do you have any idea what these people are paid?

They aren't about to walk out - where would they go, this is a Global Problem not a local one limited to just a couple of Institutions.

Yes I do, i work with them every day!

This may sound stupid, but I work in the same frame of mind, yes im getting paid a st load of cash, but whats the point in me working hard, getting up at 5am leaving at 9pm and getting jack all reward for it.

Why would you bother going the extra mile for your bonus if there wasnt one.

I know so many bankers who had bonuses and are now walking away from jobs, walking into places like Daiwa & Nomura for much better jobs and bigger bonuses or just swanning off to somewhere hot.

[seaninog]

Smiler. said:

No. Surely all the fantastic profits made were actually a lie. The money is not really there, it never was. What's the word I'm looking for....Fraud, that's the one.

A common misconception. RBS, as an example, employed over 120,000 people in the UK at its peak. It was a behemoth of an operation with fingers in many, many pies. In truth it was one area that caused all the losses: that related to sub-prime investments. Many other areas continued to make legitimate, real profits. My argument is that these successful, profitable businesses that had nothing to do with the loss-making areas should be paid bonuses.

seaninog said:

....If I run a business (and as the Taxpayer, I now do run one: a bank!)......

Are you CEO of a bank?

No. I'm a businessman and a taxpayer.

JonX2C said:

Yes.

IF they dont they will all walk away very soon and not bother coming back to work......

Where will they all go?

Another common misconception that there are no jobs out there in banking. Like any industry, even in crisis there are opportunities for out-performers. there are jobs out there and the good Traders will leave for them if they don't get paid. We, the Taxpayer, will be left with a Mary Celeste of below average bankers.

Edited by seaninog on Monday 16th February 11:49

Edited by seaninog on Monday 16th February 11:51

[_Voyager_]

Yes, if they perform better than expected. Bonuses for individuals should be about achieving. The SMART'er (god I hate management bks but it fits) the better.

100% of our business comes from local government, and is therefore all 'tax payers money'. Do they neigh sayers think our team should not be rewarded for high achievement? If our business performs well, aided by bonuses intensives for our team, I am the only one who benefits .

The perverse thing is if the banks perform well, aided by high achievers, the profits will benefit the public purse by a higher share price. Attract the dross and the banks will under perform and the public will not re-coup the investment.

Edited by _Voyager_ on Monday 16th February 11:58

[JonX2C]

No your right, there are still loads of banking jobs out there, especially with the likes of people like DAIWA SMBC setting up.

Lot of people are moving over to RISK management as well.

[Eric Mc]

seaninog said:

Vipers said:

Does average Joe Public get a bonus, no he doesnt. Why should the likes of bankers on lots of dosh get one, they are just doing their job same as evryone else, and being paid for it. (At times, it seems obscene amounts of money.)

Thanks for your input Vipers. However, I am of the view (as stated) that the fact we don't approve of the nature/size of the bonus culture is irrelevant. It's an industry standard and as long as it remains so (and that, as I said, is a whole other debate, separate for now) then we have to abide by it. In the same way we wouldn't take over a Construction firm and dictate when people should take their holidays (as it's an industry standard), we can't single-handedly go against this culture either.

Incidentally, the reason it exists is that these individuals make far more money than Joe Public. It's a percentage of profit made and in that sense entirely "fair". The more they get paid means the more the bank has made out of them in the first place.

"Industry standard" is another term for "the norm". I would put it to you that "the norm" does not apply any more. In fact, what was considered "the norm" is actually the root cause of the problem. The fact that contracts were put in place at a time when "the norm" was OK does not apply anymore.
"The norm" is no longer OK and a new way of remunerating bank staff based on careful business practices, correct consideration of customers' needs (not what products you can flog to them) and professional apparaisal of customers and appropriate prtoducts needs to be implemented PDQ at banks. The "sales" culture of banking has brought it to its knees - and bonuses were an inherent part of that "sales" culture.

[s.m.h.]

OK, so if you pay all the bonuses from a big pot and the money from profits is there - fine.
If for some reason the money isn't there, what would they do? Borrow it?
Surely the money was given to the banks to prevent them from folding.

Yes the traders were doing their job, just like the workers at the Mini plant. Though its more likely the traders will be the ones that have jobs in 6 months, bonuses or not.

I understand that the whole bonus system is part of the banking system, what if the option was take your bonus and here's your P45 or keep your job and no bonus?

[Smiler.]

seaninog said:

Smiler. said:

No. Surely all the fantastic profits made were actually a lie. The money is not really there, it never was. What's the word I'm looking for....Fraud, that's the one.

A common misconception. RBS, as an example, employed over 120,000 people in the UK at its peak. It was a behemoth of an operation with fingers in many, many pies. In truth it was one area that caused all the losses: that related to sub-prime investments. Many other areas continued to make legitimate, real profits. My argument is that these successful, profitable businesses that had nothing to do with the loss-making areas should be paid bonuses.

I would like to see the figures from these profitable businesses.

seaninog said:

....If I run a business (and as the Taxpayer, I now do run one: a bank!)......

Smiler. said:

Are you CEO of a bank?

No. I'm a businessman and a taxpayer.

How does that make you run a bank?

seaninog said:

JonX2C said:

Yes.

IF they dont they will all walk away very soon and not bother coming back to work......

Where will they all go?

Another common misconception that there are no jobs out there in banking. Like any industry, even in crisis there are opportunities for out-performers. there are jobs out there and the good Traders will leave for them if they don't get paid. We, the Taxpayer, will be left with a Mary Celeste of below average bankers

Assuming that your first statement is accurate.

[seaninog]

Eric Mc said:

seaninog said:

Vipers said:

Does average Joe Public get a bonus, no he doesnt. Why should the likes of bankers on lots of dosh get one, they are just doing their job same as evryone else, and being paid for it. (At times, it seems obscene amounts of money.)

Thanks for your input Vipers. However, I am of the view (as stated) that the fact we don't approve of the nature/size of the bonus culture is irrelevant. It's an industry standard and as long as it remains so (and that, as I said, is a whole other debate, separate for now) then we have to abide by it. In the same way we wouldn't take over a Construction firm and dictate when people should take their holidays (as it's an industry standard), we can't single-handedly go against this culture either.

Incidentally, the reason it exists is that these individuals make far more money than Joe Public. It's a percentage of profit made and in that sense entirely "fair". The more they get paid means the more the bank has made out of them in the first place.

"Industry standard" is another term for "the norm". I would put it to you that "the norm" does not apply any more. In fact, what was considered "the norm" is actually the root cause of the problem. The fact that contracts were put in place at a time when "the norm" was OK does not apply anymore.
"The norm" is no longer OK and a new way of remunerating bank staff based on careful business practices, correct consideration of customers' needs (not what products you can flog to them) and professional apparaisal of customers and appropriate prtoducts needs to be implemented PDQ at banks. The "sales" culture of banking has brought it to its knees - and bonuses were an inherent part of that "sales" culture.

"The norm" as you put it does still apply. Traders at Barclays, JP Morgan, Deutsche bank etc will all get bonuses, albeit vastly reduced on previous years. I have always used the term "market competitive bonuses" in my argument and while "the norm" has changed, the successful Bankers at nationalised banks need to be paid in line with this or they will leave.

That you believe "the norm" is no longer an acceptable way of paying people is, as I have always stated, a separate debate.

If you want to get into a debate about whether customers were sold what was appropriate for them an the "sales culture" then you might want to involve food companies who sell fatty food to their customers, children's toy companies who bombard our kids with "needs" for SpongeBob DVDs, toys etc, and so on. Every industry is guilty of creating "needs" and selling their customers what they want to sell and not what tey "need". That's a much wider debate and it's not exclusive to Bankers.

[Eric Mc]

Being an accountant, I am well aware of the gradual "commercialisation" of activities which, once upon a time, were considered professions rather than "just another business".

Banking has gone through a similar transformation over the past 30 years.

No one has ever doubted that the sale of retail goods and foodstuffs etc was only ever conducted on a pure commercial basis. But even these industries have their rules and regulations designed to prevent customers from being "ripped off" or even killed (which can happen with shoddy goods or poorly produced food).

The financial services industry, in "old" times did have a more professional approach to what they did with the assessment of their customers having a great bearing on what type of advice was appropriate for that customer - whether a business or an individual.

When the "sales" imperative became the overwhelming driving force behind banking, all these old atitudes were summarilly ditched in favour of growth and bonuses.

Maybe it's time that the banking professions looked at its own behaviour over the past few decades and returned to a more "professional" way of operating.

Overwhelmingly, we, as a society, really do seem to have abandoned any sense of morality when it comes to running busineses. The only rule applicable is "what makes the most money". Hopefully, this tremendous shock to the banking system will restore some perspective to the way banks operate.

I dread the day doctors become commercialised - or maybe they already have?

Edited by Eric Mc on Monday 16th February 12:52

[Eric Mc]

EVERYONE in business has to think commercially. That is not the problem. The problem is that, in the professions, a balance between "commercialism" and "proffesionalism" must be maintained. My argument is that this balance has been lost over the past few decades.

Edited by Eric Mc on Monday 16th February 13:02

[Eric Mc]

The fact that you do not understand what I am saying is perhaps indicative of the way the professions have abandoned some of their "professional" heritage.

In a non-professional business - say, a local store, then the store-keeper will do what he can to encourage customers to buy his products and for him to maximise his profit on each transaction. Now, I recognise that even shopkeepers need to be mindful of some moral code - such as selling alcohol or cigarettes to youngsters - but, by and large, they are fairly free to behave with a purely commercially apprach to business.

In the "professions" (and I am taliking about the law, medicine, financial services etc) there should always be an overiding sense of ethics as well as commerce. When the two conflict (as they very often do), ethics should take precedence. I, as an accountant, often have to make "ethical" choices about mu clients and their affairs which, if I ignored them, could mean I make greater profits, But ethics must come first. Ethics is just another word for "morals".

My point is that, in banking, ethics took a back seat to the profit motive.

[therealpigdog]

Eric Mc said:

The fact that you do not understand what I am saying is perhaps indicative of the way the professions have abandoned some of their "professional" heritage.

In a non-professional business - say, a local store, then the store-keeper will do what he can to encourage customers to buy his products and for him to maximise his profit on each transaction. Now, I recognise that even shopkeepers need to be mindful of some moral code - such as selling alcohol or cigarettes to youngsters - but, by and large, they are fairly free to behave with a purely commercially apprach to business.

In the "professions" (and I am taliking about the law, medicine, financial services etc) there should always be an overiding sense of ethics as well as commerce. When the two conflict (as they very often do), ethics should take precedence. I, as an accountant, often have to make "ethical" choices about mu clients and their affairs which, if I ignored them, could mean I make greater profits, But ethics must come first. Ethics is just another word for "morals".

My point is that, in banking, ethics took a back seat to the profit motive.

+1

[jamesuk28]

There is only one word that rythmes with Bankers..................
They created most of the mess due to greed or incompitence
They still wont lend dispite being bailed out
They are switching lending agreements from base rate to LIBOR
So no, fk them