Sunday, 23 January 2011

The Bonus Culture

For the Board , management and staff of Investment banks and other financial institutions , it is "business as usual ".
The Bonus culture is back !
Back and climbing , gradually, to almost its level during the glorious years of economic boom in the corridors of the City of London's glass and marbled glided skyscrapers.
Then, during the boom years, Bob Diamond, the American boss of Barclays Capital in London, collected £21m; while the top man at Goldman Sachs, London got £12m , as bonuses.
Now, some bosses of investment companies are planning to pay themselves about £2million each and their other staff will be paid 9% of their annual salary, as bonus.

For all expectant bonus-earners , there is nothing like the excitement of bonus time. The Bonus is king, what everyone waits for annually, like Christmas Day, but much bigger and better.
Workers expecting monster payouts after the Christmas and New Year season ,look forward to paying off the house, get the sports car, luxury holidays and mega shopping sprees.
As at last week , thousands of bank and other financial sectors workers got news of the confirmation of their annual bonuses ; while some civil servants and staff of some private companies , got theirs even before Christmas.

There has been a lot of vitriol in the society against the return of the bonus culture in UK banks and other financial institutions, which were bailed out of a deep quagmire by tax-payers money, recently.
Accusations of greed, selfishness and insensitivity has been railed against bankers.
Though I agree that the return of huge bonuses is premature; I do not begrudge such pay-outs in its entirety.
Which employee would be offered a huge bonus and would not grab it with both hands?
“Selfishness is that detestable vice which no one will forgive in others, and no one is without in himself".
If some workers in the UK got paid bonuses recently, why not bankers ?
"Say I these things as a man? or saith not the law the same also?
For it is written in the law of Moses, Thou shalt not muzzle the mouth of the ox that treadeth out the corn. Doth God take care for oxen?" 1 Corinthians 9:9.

The point is not only "why ?", but "how ?"
How have the gang-up of bank managements been able to have their way and to insist in rewarding their boards , management and staff with huge bonuses ; against government's previous resolve to curb and peg Bankers' bonuses by imposing its much-trumpeted "Bank Bonus Tax"?
Who arm-twisted whom to back down and back off ?
Apart from government's failed attempts to tax and curb huge pay-outs by bankers to themselves , the shareholders of the various banks too, have a share of the blame in preventing the premature payments of huge bonuses in a climates of cuts and losses.
The shareholders should have and must put in place effective resolutions to peg how much of the company's profit goes into the pockets of employees, even at Board level.

Not only the staff in the financial towers of the City have enjoyed and are still enjoying fat-cat bonuses.
Civil servants in HR departments earn 8% of their annual salary as bonuses.
In fact , there are civil servants who are earning ,quietly and unnoticed, a relatively high percentage of their income as end-of-year bonuses.
But, understandably, the public search light and anger is not on the bonuses of civil servants and other workers , but on the pay packet of bankers in "public-rescued banks", who are being paid bonuses despite turning in end-of-year huge losses!
The City Bankers are the scape goats for the "sins" of all fat bonus earners in the UK.
Especially in London , where some bank and other financial employees earn as much as a lump sum of at least between £90,000 and £250,000 and even more, as annual bonuses.

One of such fat earners , who is also my nephew, had a small party for friends and family , last week, to celebrate the return of their much-cherished and awaited annual bonus.
He had told me sometime in December, that he and his colleagues had fears that their expected bonuses would be reduced hugely or could be deferred or even cancelled due to the regime of spending cuts in the various sectors of the nation.
But his fears were needless. They got paid higher than they got last year and it has been celebration galore for many City workers in the past forth night.
He called a few days later to say he had good news and will be celebrating after receiving his very fat six-figures bonus cheque.
"Good for you ! Now, young man don't forget to pay your tithe first , before going on a spending spree!", I said , patting his back.
"Yes , aunty!" he replied , hugging me with great joy.
Of course , there was a good-natured heated debate for and against bank bonuses at the party .
Many of my nephew's guests riddled him and some of his colleagues who were in the party with questions, about the justification of bankers earning such "undeserved" sums of money as bonuses, after they were guilty of causing the near-collapse of the economy , a few years back.
The management of banks and other financial institution feel justified to argue that their staff deserve to be rewarded adequately because if you pay somebody to sell something, it becomes very contrived to reward that person based on anything other than the amount of those sales.
Management of private companies reserve the right to pay their staff what they deem suitable for various levels of staff.
Such companies always shop around to employ the most-qualified for their operations and remunerating them handsomely is just one of the ways they retain the services of such valuable staff.
"If we don't pay big bonuses, our good people are going to walk".
That has always been the excuse from investment banks, defending the colossal payouts they give their staff.
It has been the long-standing tradition of i-banks, management consultancies, and law firms to descend from around October every year on UK universities; sponsoring every student society in sight, wining and dining anyone who'll listen to their presentations and doing a very effective job at convincing students that staring at spreadsheets in glass towers near the Thames; working in a job with them is the only really acceptable use of their degrees!
Adair Turner, the chairman of Financial Services Authority, has gone further still, suggesting the vast rewards on offer sucked talent from more productive parts of the economy. "In the years running up to 2007, too much of the developed world's intellectual talent was devoted to ever more complex financial innovations, whose maximum possible benefit was at best marginal, and which in their complexity and opacity created large financial stability risks," he said.
True talk. However one has to consider that the workers in the investment sector work up to 60 hours weekly , apart from extra hours at weekends.
Such staff use their time working in high bonus environments to build enough capital to start new businesses and invest in properties and other sectors of the economy; whithout the burden of debt.
Left to the bankers , the excessive bonus culture would be firmly entrenched, whether they turn in profits or not.
The first rule of life is self preservation, which results in "me first" and the creed of materialism. Selfishness results from the original sin of separateness (separation).
“Selfishness is the greatest curse of the human race”- W. Gladstone.

The fact of this case is that the onus of curbing the excesses of bankers paying excessive and unjustified bonuses to them selves lie not with the beneficiaries of this system of doing business; but through global firm economic regulatory policies.
To be effective, these policies have to be far-reaching ; not only in the UK ,but globally.
Human beings have been raised to compete, to want more!
More! More! It's a way of life. It's about greed.
If this bonus culture is eradicated in the UK only, they easily, would move to other lands.
When defective financial practices ruin the economy of any segment of the world economy , there is a Domino effect , globally , as experienced a few years ago.
Urgent economic policies ,enforced by the coalition of global financial and economic regulatory departments , are needed to protect the World Economy from group interests.

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