Tag Archives: politics

Are Bankers Bonuses Justified?

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"financial crisis", "banking", "bonus culture", "bankers"

The answer of course is never as simple as a yes or a no!  The question comprises of a highly convoluted set of circumstances and factors that some bright academic one day might use to write his doctorate. You’ll know who he is by the one who everyone will be avoiding sitting next to at a dinner party.

First let’s remove the political bandwagon from the question.  Here’s how I imagine a conversation went in either a Coalition or Labour Party PR meeting:

MP1 : We need more votes.

PR Man: Well, OK what we need is something all the public are angry about then jump on that and promise to support them to the hilt and be equally angry.

MP2: Like the expenses scandal?

PR Man: Yes but their anger directed at someone other than us.

MP1: Then we’ll get more votes?

PR Man: If the public see we’re as angry as they are and promise to change it, then yes.

MP1: Won’t they see through that?

PR Man: Maybe but they’re too angry to notice.

MP2: But isn’t the government in charge meant to ensure the mess doesn’t happen in the first place and ensure economic stability? Isn’t it kind of our fault as well?

MP1: You just don’t understand politics do you. Bankers witch hunt it is……

I not suggesting the banking community are blameless in any way, shape or form. Some were reckless, in cases,  some were greedy and had no proper self-regulation or forethought about the future. Some however were very good at their jobs and through no fault of their own found themselves in a global economic meltdown. So let’s not drown them all just yet and burn them at the stake. The last thing I want to see is small children walking around dressed in smart pinstripe suits on Halloween.

I could go on for pages and pages describing how bonuses can and cannot be justified. Neither of us want that! So I’ll try and be as brief as possible, providing an simple overview.

Firstly, the bottom line is that bonuses are performance related pay and part of the remuneration package in many different businesses in the UK and around the world. From call centre staff and sportsmen, to management, it’s an accepted part of many different professions.

Now let’s remove the amount of the bonus from the argument. Note, I’m not talking justification yet, just taking the amount of it. The bonuses awarded to bankers are in some cases a huge amount of money to you and I, millions,  some might say an obscene amount. (Or in my new currency: one Tamara Ecclestone bathtub) It’s an amount that you and I can possibly only dream of earning.

Does the amount make it wrong? No, I don’t think so.  If that’s part of an agreed pay package and comparable in that line of work then that in itself can’t be wrong.  A top footballer can earn £1 million a month. Is it an immense amount of money? Yes. Is it fair? Maybe. Is it wrong? No, it’s part of an accepted part of our capitalist society and it’s better than the alternative (another debate that we won’t go into now). I’m not suggesting that they’re the same thing or comparative jobs. I mean I have no idea how well a banker plays football… probably really rubbish and so they would end up playing for Wolverhampton Wanderers.

Should a banker be rewarded for individual performance even if the company is failing or in serious debt? Let’s take a different example:

I’m the top call centre agent and have to achieve 100,000 sales in a year in order to get a 20% bonus of my salary.

Now let’s run through some questions:

If I achieve my targets and through no fault of my own the company is doing badly, should I still get the bonus?

If the company through external pressure refuse my bonus I worked really hard for, what incentive is there for me to perform at my best in the future or even stay at the company?

If the agent performed actions that were reckless and put the company at further risk to achieve that bonus should they still have it? Should they be fired?

A few questions to think about there and banks have to be careful in future that their targets set for bonuses do not force or encourage reckless activity in order to achieve them.

The governments around the world need to put into place more rules, regulations and controls to ensure the global banking crisis never takes place again. The banks in turn need to ensure that their bonuses and targets reward sustained stable growth and profitability.

Do we, the public, have a say in bankers bonuses?

A bank is a business. A business is owned by shareholders. The directors of that businesses have a duty to the shareholders and to run that business profitably. It is the shareholders that have certain power and rights over that business and can, if there are enough of them call votes, if necessary to change that business.

For banks such as RBS and Lloyds we all are now part shareholders. So do we have a right to speak against the bonuses awarded? Yes we do, its our money invested in those banks. However the great economic genius of their time, my grandmother, once said ‘don’t cut your nose to spite your face.’

The thing about a banker witch hunt is that they will often drown an innocent banker and one that could be the ideal candidate to get us all out of the crisis quicker and on the road to recovery. What people have to remember is if we want them to perform to the best of their ability we have to offer incentives, like their competitors will be doing. If we don’t do this and in some cases publicly force them to give up their bonus, then, like workers in any businesses, like you or I, they will look elsewhere and we will end up with the average mediocre people running our banks instead.

Should bankers have been awarded their bonuses before the banking crisis? In hindsight perhaps not but we must move forward. We have to reward those who will use their intelligence, knowledge and experience (including lessons learnt) to safely take the banks back to recovery. So before we cry out how unfair it is that bankers should get such high bonuses when we are struggling, we need to also think about the ramifications of not rewarding them.

Image reproduced from news.sky.com

Margaret Thatcher: There’s No Such Thing as Society

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Whether one loved or hated her, Margaret Thatcher has undoubtedly left her stamp upon British politics and her death last week has confirmed her place in history as one of the most memorable and controversial political icons.

Margaret_ThatcherBorn in Grantham, Lincolnshire on October 13th 1925, Margaret Hilda Roberts, as she then was, spent her childhood there, where her father, Alfred Roberts owned two grocery shops. Thatcher, along with her sister, Muriel (1921-2004), lived in a flat above one of those shops.

Brought up as a Methodist, Margaret was a pupil at Huntingtower Road Primary School. From there she won a scholarship to Kesteven and Grantham Girls’ School, where from 1942-43 she was head girl.

After leaving school she went to Oxford to study Chemistry, and graduated in 1947. She worked as a research chemist until the advent of her political career, which did not begin to take shape until the beginning of the 1950s.

She came to power in 1979, to a storm of controversy, as the first female Prime Minister and resigned in 1990, after falling out of favour with both her cabinet and the people.

But what will Margaret Thatcher be remembered for? Indeed, can it be right to celebrate a figure who, in her eleven year term in office, has caused such bad feeling amongst the British people?

Thatcher’s lavish funeral – to be held on Wednesday at St Paul’s Cathedral, is expected to cost around ten million and, unsurprisingly, it has attracted criticism from those who consider it too high profile for such a controversial figure.

There has even been talk of the police arresting people before her funeral to stop them rioting, so strong is the feeling against her. Granted, some of these people were not even born when she was in office, and are simply using the event as an excuse to cause trouble.

Yet, for those who do remember her more stringent policies, Thatcher is still resented for the damage wrought upon the communities she tore apart. Most notable are her demolition of the unions during the Miners’ Strike, (1984-85) which ripped the heart out of the mining communities, and saw thousands of men out of work and families ruined.

Fuelled by bitterness at the humiliation of her predecessor, Edward Heath in the 1970s, Thatcher had a score to settle with the National Union of Mineworkers. She settled it by introducing numerous clauses and legal measure to prevent strike action. Combined with the decline of the manufacturing industries, which had been the beating heart of working class identity, these factors impacted powerfully upon communities, especially in the north of England, where unemployment was highest.

Indeed, one of Thatcher’s legacies to us is the underclass – generations of unemployed for whom work – not merely as a source not just of income, but also as a source of pride and identity – has lost its meaning. Thatcher – if one is to be visceral – ripped the heart out of the working class and stamped on it.

In many respects, the traditional working class, formed around the mining and the steel industries, was eroded, if not destroyed by Thatcher. In its place we have a lost and alienated class with a collective identity crisis.

Negative equity is another legacy from the Thatcher era. The Government’s Housing Act of 1980 allowed council tenants to buy their own homes. It was a policy which intended to create, ‘a nation of homeowners,’ but which led to the culture of debt we now inherit. Over the subsequent decades, predicated upon the assumption that the value of property would continue to rise, this housing boom created a Britain mortgaged to the hilt and drowning in debt, when the inevitable happened and house prices fell.

Then there was Thatcher’s introduction in 1987, of the contentious Clause 28, a neo-Victorian attempt to censor teachings pertaining to homosexuality in an age that was already blighted by the A.I.D.S. epidemic.

The act, which stated that under no circumstances must authorities and schools intentionally ‘promote homosexuality,’ led to the closure of many lesbian and gay societies and clubs at school, for fear that they were in breach of the act. We can never know what harm Clause 28 has done to those affected by its introduction – vulnerable young people in need of support who were rendered more marginalised and isolated by the suppressive forces of central and local government.

In summary, it is a great pity that Thatcher used her formidable will and substantial energies to wound and destroy the spirit of the nation. Exercised in a different way, her powers could have achieved her goal, to ‘make Britain Great again.’

Rightly or wrongly, Thatcher defined the 1980s. She creating the materialistic, self-serving ‘me’ generation who believed they could have it all without paying the price; where opportunities were created and not awaited, and where there was, “no such thing as society, only individuals.”