So RBS make pre tax loss of £766M yet still pay out bonus’s of £785M. I do understand the need to pay the best people well, and these guys are earning well, but this level of bonus on top? Do they not have any ambition to sort out the Bank, get it back into profit, then and only then maybe they would deserve a bonus.

As I understand it, elements of the bank are in profit. Maybe the losses would have been greater had they not had these folk on board?

I imagine its becuase most bonus contracts arent linked to corporate performance but departmental/personal performance.

Some departments/personell will have outperfromed targets, others wont.

Also most of those losses will be additional writedowns (god, I hope they are! long overdue 😉 ) which wont have a corresponding bonus pool since they will be asset rights downs on legacy positions.

Of course what ought to happen is that there is a corporate performance trigger requirement before any bonuses are paid. But I imagine that would only come in as and when new hires are signed?

I imagine its becuase most bonus contracts arent linked to corporate performance but departmental/personal performance.

Good old bankers, having their remuneration not linked to company performance 🙄

A lot of staff will not have a Bonus Contract, it will be part of their Total Reward, and always be discretionary. You can hit your targets, in fact surpass them and still not get a bonus. Basic salaries are pretty decent in the industry.

always be discretionary.

certainly not always discretionary. Some are quite specific calculations that are unavoidable. Depends on the contract that was put in place.

You can hit your targets, in fact surpass them and still not get a bonus

where theres room for discretion then maybe – but then of course you piss of someone who’s managed to be profitable in a sea of unprofitability and they leg it leaving the company with potentially poorer performance next year. Damned and damned 😉

Within Banks the vast majority of staff are involved in fairly low level work that is barely profitable however this chunk of the business will ‘fund’ and offset the risk of the small but massively profitable investment banking and corporate activity.

It would not surprise me if only 5% of the staff are directly involved with 50% + of the gross income. This is where the best people / big bonus argument comes in to play.

It is not inconceivable that individuals are generating £100m profits and therefore they would consider it entirely reasonable to be on a 6/7 figure salary with similar bonus.

Not saying its right or wrong that’s just the way it is!

Stoner, I know some are Contracted, but you only took part of my quote!! I said a lot of staff will not have a contracted bonus.

Anyways, I do know that the “expected” bonus in the non contracted staff still is there, and it is still being given out though at lower levels. It is now part of the culture, just pure greed in my view.

Some civil servants get bonuses and they never make ANY profits!!

A fantastic article from City AM this morning, quote:

Bonus row now completely irrational

UTTERLY absurd: that is the only way to describe the debate on bonuses. Here is why. Imagine a salesperson at a widget company so brilliant that she brings in £10m a year for her firm. She is the best widget salesperson in the UK and her firm’s biggest asset. Her company, unfortunately, is loss-making – but if it were to lose her to a rival, it would collapse. Yet according to the current received wisdom, she shouldn’t receive a bonus. Only profit-making firms should be allowed to pay bonuses, we are constantly told, regardless of individual effort and regardless of consequences. The fact that this means she will leave – widgets salespeople aren’t know for their loyalty – and her firm will go bust, with the loss of many jobs, is deemed irrelevant. It’s madness.

Here is another scenario which illustrates the ambient silliness. Imagine a widget firm that pays its staff half in fixed, base pay and the remainder in variable pay. A recession strikes and the demand for widgets slumps. The firm is able to cut staff costs without having to fire anybody; it can still reward stars and survives intact. Now imagine another widget company, run in the way commentators tell us is more prudent. It has slashed variable pay and put up base pay (it tried merely to ditch bonuses, but the staff threatened to walk out, so it had to hike fixed salaries). The recession hits; it is unable to cut costs instantly, starts making redundancies but is crippled by the large payouts needed and by the slowness of the process. It goes bust, all employees lose their jobs and the shareholders lose their shirts.

Badly designed bonuses can trigger stupid behaviour – but well designed ones with deferred and equity components and no payouts for failure needn’t, and an economy with low fixed and high variable costs is more resilient than one with the opposite characteristics. Here is another inconsistency: A banker on a base pay of £10m and zero bonus gains plaudits; his colleague on a base pay of zero and a bonus of £4m is hated. Why? And why does everybody always forget that high salaries in the UK are a joint venture between HMRC and the individual? Even the terminology is suspect: in many cases, what is known as the bonus system (or these days, as the “bonus culture”) is more a revenue or profit share system; it is not meant to exist only or even primarily to reward exceptional performance. The variable component reflects a range of factors – but in the aggregate is a mechanism to divvy up between labour and capital the cash generated in industries prone to large cyclical fluctuations. Contrary to the received wisdom, pay as a share of revenues is not especially high in finance; it is comparable to many other service sector industries.

Regular readers will know that I support real capitalism and abhor bailouts. I don’t think RBS should have been allowed to continue to exist post-crisis. But it was, and the aim now ought to be to get taxpayers’ cash back. Yet the bank is being run to minimise pay in the short-term to score political points (and politicians who once used to stand up for workers’ rights and against shareholders are cheering), rather than being managed to maximise value. The investment bank unit is deliberately being crippled. The pay freeze for thousands of top staff proves the firm is being treated like the civil service. Governments can’t own banks; they always end up destroying them. What a mess.

“Big losses in a very strange way are a sign of success, it’s a sign that we are taking the medicine that RBS needs to make it safer and we’re doing it faster than we thought we could”

There you go from the horses mouth – being in profit would be very bad news.

TJ is working himself into a frenzy right now in preparation for a bonus debate…

why does everybody always forget that high salaries in the UK are a joint venture between HMRC and the individual?

Except where the people with high salaries have good accountants that is.

understood, wallace.

But you try explaining to an office manager why she wont get her £5k “bonus” because it would be greedy, when the Trader on the other side of the floor gets his £250,000 performance related pay top up 😉

Big losses in a very strange way are a sign of success, it’s a sign that we are taking the medicine that RBS needs

The only thing that statement has going for it is that it would have been nice to have heard it 3 yrs ago when write downs should have been made. There’s still a long way to go.

What he means there is that they are working through the legacy crap faster than anticipated and writing it all off.

What they have never been open about is the amount of crap that they have, it should have been fair valued adjusted over the last couple of years so the write off would not hit the bottom line.

PS Mashie is spot on. The bonus issues is completely clouding the much wider problem that is taxpayers have £b’s tied up in a Bank that needs sorting out. Priority should be to sort it out not poor over what amounts to a blip in the annual cost of running the business.

What they have never been open about is the amount of crap that they have, it should have been fair valued adjusted over the last couple of years so the write off would not hit the bottom line.

which is what I mean.
Im familiar with plenty of stuff that’s still 20+% over valued on the books.
And even if they arent willing to admit it, they should have know that years ago.

But you try explaining to an office manager why she wont get her £5k “bonus” because it would be greedy, when the Trader on the other side of the floor gets his £250,000 performance related pay top up

Or those of us working in successful parts of a company, personally responsible for bringing in significant profits, who then get made redundant because the rest of the company is in the sh*t (and it isn’t a bank).

I know Stoner.

Good article mashiehood.

Yes, you have to reward high performers, and keep them happy. But where has loyalty gone? The days of having loyalty to a particular employee seem to have long gone. I speak from one who spent 25 years at a firm, and was (IMHO) a pretty decent performer. Now I have no loyalty to them, and we have in fact parted ways.

It seems that banks can only keep the top performers by paying them top whack and Bonus, and in my experience they have become a lot poorer for that. The employee loyalty and feeling of belonging and being part of a “family” has gone.

[hijack]speaking of which aracer, you found a new billet yet or are you still in working on your pbs?[/hijack]

Working on my CV (just sent it off to one place this morning) – getting hints that I’ve had a long enough holiday. To be fair they did have good redundancy terms, though I still got significantly less than I made/saved them in the month before I left.

should have negotitated performance related redundancy bonus 😉

So… are we allowed to lynch bankers in the street yet? Or not?

druidh – Member

Some civil servants get bonuses and they never make ANY profits!!
Posted 9 hours ago # Report-Post

The treasury funded where I work in the civil service to the tune of £6 million and we returned £43 million.
Our reward
No pay rise for 3 years,no bonus,30% increase in my pension contributions for a smaller pension that I will have to work 7 years longer to collect then when I do get it it won’t be index linked to inflation as I was promised.Redundancies in the offing but only after my career long held redudancy terms have been savaged by 40%.
Now that’s what these high performing bankers should be getting!

Posted this in the other thread:

This isn’t capatalism nor is it free-markets – I’m not sure what is is other than simple BS.

RBS has been a smokescreen for too long and Hester (while doing an Ok job of a v difficult task) is disingenuous when talking about paying his inv bankers less than the oppostion. Yet another smokescreen.

So RBS’ masters of the universe:

Take 37% of group risk-weight assets from which they make 26% of operating profits. Well done guys great effort!! Feel sorry for the guys in the less-glamorous but well performing parts of the bank. As usual this is BS coming out of GBM.

And the division makes a low 7.7% ROE, destroying shareholder (us) value yet again with a cost-income ratio at a ridiculous 73%. Sorry Stephen, your incompetents spend 73p in every £ earned and they generate a ROE of approx 300bp less than the cost of capital. FFS

To repeat, this is not capitalism its simple BS.

UTTERLY absurd: that is the only way to describe the debate on bonuses. Here is why. Imagine a salesperson at a widget company so brilliant that she brings in £10m a year for her firm. She is the best widget salesperson in the UK and her firm’s biggest asset. Her company, unfortunately, is loss-making – but if it were to lose her to a rival, it would collapse. Yet according to the current received wisdom, she shouldn’t receive a bonus. Only profit-making firms should be allowed to pay bonuses, we are constantly told, regardless of individual effort and regardless of consequences. The fact that this means she will leave – widgets salespeople aren’t know for their loyalty – and her firm will go bust, with the loss of many jobs, is deemed irrelevant. It’s madness.

This is the BS that people getting bonus’s trot out. The fact is that not only is the person doing the brilliant job getting a bonus (quite rightly) but there are loads down the food chain still with their snouts in the trough. There are 10’s of thousands getting bonus’s, not just the top widget maker, and that is the problem.

Its often who you know and BS like that, that gets your bonus. Seen it far too often. So many far less capapabe people getting a leg up it really sickens, so glad I am out of all that.

Wallace and (leaving aside that the City AM hypothetical case (a) is a non-starter in a sustainable busines and (b) not relevant to the world of GBM in RBS) it doesn’t even hold up to basic analysis. Its pure smokescreen.

The top man from greggs summed this up best…pay levels at top top levels are b0llock$.
I blame the footballers.

I work in an RBS service centre earning about 15K a year. thanks to everything in the media it looks unlikely any of us will be having a bonus this year, eventhough we have exceeded all targets set for us.

I can understand not for people earning loads, but us low earners get it in the neck as ususal.

That is the real issue here – the GBM smokescreen obscures a lot of the good jobs being done in specific areas of RBS. But that’s not new, eh hills? Sorry to hear that BTW.

thats rubbish hills! sadly, you will get no sympathy here, but if you were a ‘hard working nurse’………..

The bonus culture did get out of hand. A friend of mine works in HR in the City and sacked a guy several years ago cos he’d screwed a trade and lost a few million for his employer. The guy was insisting on his guaranteed bonus. My mate was freaking out at the arrogance of the guy.

More importantly tho, the national debate about bonuses and bankers is very very poor quality. Very few of the people complaining have any idea how banks work, what the life is like, what the sacrifices are, how bonuses are calculated, how they related to profits earned etc etc.

It simply doesn;t make sense to let people who know virtually nothing about banking and remuneration (the general public) dictate the terms of how a bank can remunerate its staff. It would be very dangerous to let the emotion of the debate rule how decisions are made about an industry which delivers and supports such a huge proportion of our future national wealth at such a crux moment…

brooess – to an extent, but there is also a phenomenal amount of BS used to justify bonuses especially in GBM divisions in many banks. Let’s not forget that it takes @$1m just to put a bum on a seat in a City office, so just for starters that should be taken off the revenue numbers, then other costs, capital etc. It would be better for all (including hills and the taxpayer and the genuinely high contributing professional) if there was better measurement, transparency and accountability.

Having said that, I agree with the emotional distortions over bonus – one result, a 3x in basic salaries after the crash (?????) and indications that RBS has been doing similar again now. And that is the correct way to build a sustainable business and shareholder value??????

Not in charge of paying creditors are you, Hills?

Please don’t take this personally, but RBS group are my biggest and longest overdue creditor, two years plus on some invoices, so if you could get round to paying the businesses you owe money to, I could pay my overdue tax, which would help your bailout, some might even work its way down to you.

You lot aren’t my only client by a long way, otherwise I wouldn’t be here, but I’ve stopped working for your insurance subsidiaries, so you’re probably going to get it in the neck from pi55ed off policyholders too. But then you did sell off the claims to a company that promised to sort them for you.

It simply doesn’t make sense to let people who know virtually nothing about banking and remuneration (the general public) dictate the terms of how a bank can remunerate its staff.

true, BUT, for far too long the city have devised their own remuneration strategies and unstructured bonus structures without regulation and ignoring guiding principles and advice from remuneration consultants.
disclosure has been insufficient. things are changing and guiding principles are becoming FSA standards that must be met.
Things are and will change.

mashiehood – Member
thats rubbish hills! sadly, you will get no sympathy here, but if you were a ‘hard working nurse’………..

Even by STW standards this is bizarre. Yes it’s terrible that the basic wage is low and if you have a bonus clause in your contract for targets/profits and have hit them then you should get it.
But if it had been a nurse saying this they would be told that its time to share the pain. So what’s the difference?

I am truly shocked that trees is expected to work (i assume FT) for such a wage but surely a higher wage system in the call centre would be better than bonuses.

Ahahahaha have you ever setup, run or owned a business ? **** me, I earn more a week now than my annual tax return for the first year of my first company. I wasnt quite livivng in a cardboard box but the champagne breakfasts were on hold. Seriously, wake up. Keyboard jockeys sitting in nice middle management jobs have no fckn idea what makes the world go,round. Do you really think bankers are the only ones earning this sort of money ? If you do then you have a lot to learn. Jesus get over it.