At the end of a couple of weeks when there has been pressure on the Government to intervene in the row surrounding bonuses owed to senior figures at Royal Bank of Scotland, and also seen former chief executive Fred Goodwin stripped of his knighthood, bankers’ bonuses is once again dominating headlines.
Goodwin was honoured for services to the banking industry, though was also the man at the helm as the bank suffered record £24bn losses which resulted in a taxpayer-funded bailout of the bank.
That decision came after political pressure led to both RBS chairman Sir Phillip Hampton and chief executive Stephen Hester waiving their right to bonuses which collectively were worth more than £2.36million.
I’ve personally never understood how the bonus culture amongst bankers can be justified. It’s not uncommon at many large private organisations for annual performance related bonuses to be paid out, but the astronomical figures that are so commonly reported as being on offer at the major banks give the impression of a perk which is simply taken for granted.
According to a survey published by Astbury Marsden in November, the expectation amongst professionals in the City was for an average 2011 bonus approaching £20,000, a figure that is more than a significant number of people’s annual salary. Such bonus expectations were in addition to average pay rises of 12%.
Overall, bonus payments in the banking industry run into the billions of pounds each year, and although there has been a reduction in recent years to the levels of payments during the peak of 2007-08, there was still a total of £14bn paid out for 2010.
To justify the bonuses, an argument is made of how much the country relies on the financial services industry and its need to attract, and retain, the best talent available.
But while the banking sector is clearly of huge economic importance, it is just one of many areas without which the nation would struggle to function.
How would the country look if its financial services sector was thriving, but had a completely dysfunctional health service, a severe shortage of police officers or firemen, and no adequate postal service to speak of?
All of the above are fundamental services and any stance which is adopted by bankers in which they suggest that they are the most important people in society, fully deserving of not only a bumper salary to do their job in the first place, eclipsing that of most professions, but also a hefty bonus on top is one of extreme arrogance.
Surely the salaries themselves are enough of an incentive? Certainly if I was paid a six or seven figure salary to do my job, I’d consider that in itself to be the reward for the work I was doing and an adequate reflection of the work and responsibility involved.
If the salaries are not enough, then the bankers should consider the fact that without a public bailout which industry mistakes led to the need for, the banks would not have survived. The shared responsibility of correcting those mistakes and returning the banks to a healthy position should be enough to concentrate on in the meantime.