Public servants on $20m a year

Seems that someone, somewhere is going to have an unhappy Xmas!

Gordon or Alastair didn't really think this one through, did they?

We are with Natwest (company and private accounts) so have a direct interest in the ultimate outcome, as does our Natwest Businees Manager.

I still do not see why legally the board would have to quit. Granted, arguably, they may be able to meet the obligations of maximising shareholder wealth, but why does that force them to quit. A new Board would be no more empowered, so presumably there would just be an endless round of resignations if the legal advice is correct (and Darling vetos the bonus').

And surely resiginations are voluntary, by definition. So how can they be legally obliged to resign?

I would rather see RBS collapse than see any RBS employee, whatever their base salary, get one penny of bonus. I want my money back first. If I ain't getting it, neither should they.

i have been unemployed for 9 mths now , have a income of 1000 pounds per month made up of loan insurance, housing benifit and jsa.when the loan insurance runs out i now have absolutely no qualms whatsoever of defaulting on the remainder of the debt if i am unable to find employment as the government will pick up the losses.

RBS bonuses should not be paid for the simple reason that the £6bn of trading profits has been earned in the markets by using and leveraging RBS savers and depositors money! This is the root of the whole banking crisis.

RETAIL banking MUST be kept separate from INVESTMENT banking. This is the single most important regulatory edict to prevent credit crises and banking crises which we are seeing right now.

Retail banks should be banned from holding any derivative postitions. They must be levered 1:1 on all transactions. They should only accept public retail deposits, sell mortgages, offer loans, invest in shares and corporate bonds and even FX. But nothing levered.

Investment banks should be banned from retail banking - but have a free rein to trade in any derivative of their choosing, at any ridiculous leverage which the traders and invetments bankers hearts desire. Options, Futures, CDOs, CLOs, whatever. They can run regulation-lite and pay massive bonuses on trading profits - because none of it would be from retail deposits.

Then: IBs can crash and burn - but they will never hold the retail banking public hostage - which is the exact reason RBS and HBOS and NR and BB extorted hundreds of £billions from the UK government and taxpayers.

No to RBS bonuses UNTIL the branck network and all retail deposits, mortgage book are sold off as a separate going concern. Then RBS can pay bonuses on trading profits from its OWN money.

A complete horlicks but such are the unintended consequences of propping up a failed business whilst using every devious trick in the book to prevent nationalisation.

This is a unique opportunity to explode the myth of bankers' claims to exhorbitant remuneration.

The government should buy out the last remaining shareholders, and then replace all staff contracts with limited civil service agreements. They should be paid reasonably generous salaries, to attract good quality candidates, but with performance related pay capped at one times salary.

I have no doubt that there will be plenty of graduates and experienced people who would be prepared to work under these conditions, and it would be interesting to see how the bank fares compared with others.

My suspicion is that returns may not be quite as high (but neither would the chance of collapse), yet it would show that the job of bankers is not inimitable, and can be achieved by people who needn't be greedy to the core.

RBS over charge their shareholders for defaults (Tax Payers that are just a few pounds over their ovedraft get whacked £35 for a bounced DD and the companies asking for payment, if they are a finance house add £20+ to their charges, and the Government has no ability to enforce moderation in Bank Bonuses? Then Nationalise RBS rather than be the majority shareholder. Sell off the profitable bits and split the bank up. Sell what used to be Williams & Glyns, sell off NatWest and Coutts. Sell Direct Line/Churchill and then payback the Government loans and share support costs. Then if there is any money left pay out a bonus to the Shareholders by way of Dividend. End of Problem for Alastair!

Who has final control over the economy in western liberal economies? Governments or Banks? It seems governments have only limited control over what happens in their territory in terms of how the global financial system operates, how it impacts, exploits, enriches or empoverishes a nation. Governments have even less controll (almost none) over how the global shadow banking system (tax havens, offshore banking) operates. Effectively trillions of dollars are moved around the world to make mega rich people (and many fraudsters, criminals and tax evaders) richer and to exploit any possible tax and legal loophole in existence.
On top of that many countries have very lax financial laws and controls anyhow, as the financial oligarchy has a very great influence on policy making in most western countries.
A very, very sad state of affairs, indeed!

Please read more about the facts and arguments and why this scandalous inequality (very few effective laws for the rich, many for the average tax payer) has to change urgently:
https://globalinsights.wordpress.com/

I really don't buy this argument that all our overpaid bankers would defect to US banks if they dont' receive bonuses and the Chancellor should dig his heels in.

280 + posts on your blog yesterday Robert!
It must be heartening to see how your unlocking of the "smoke and mirrors" of finance has been received.
I have been away from commenting for a while, as I was in danger of boiling over and bursting like so many of the people who post on here.
I'm not coming back.
Commenting doesn't make a jot of difference, and my efforts to consider, explain, express and debate are lost in the electronic ether.
What interests me more than anything anyone believes, knows or sees is how they feel.
I feel sick and disappointed, cheated and robbed, deceived and abused.

Bankers, Lawyers and Politicians.
Good for nothing.

"So long and thanks for all the fish"

Sorry Robert, dont quite understand what you are saying. First, you say Darling took a 'formal power' ( presumably with RBS's agreement) to authorise total bunuses and formats presumably in condiseration of the further recapitalisation and APS membership.Is that right? Second, you say the board now have legal advice that they cannot stand by the agreement(presumably) they have just authorised.Is this right or wasnt the board involved earlier? If it wasnt in their power/duties to give the first agreement, if they were involved, how could they have authorised it in the first place and what are they belly-aching about now? Not clear what you are reporting to us.

OK - but if we were to separate the investment casino-style banking operations from the 'real' banks Glass-Steagal style (as David King thinks we should) we can decide on purely economic grounds whether to pay bonuses to the investment bankers (who seem to be the big earners).

If the bonuses are likely to pay off for us as taxpayers, then fine. But if they merely make it more likely that this operation will need bailing out again soon (very possible!) then we should not pay them bonuses (or perhaps at all) - indeed we might consider the idea of selling the casino operation to anyone who will buy it, or closing it if no-one will.

There are two solutions to this problem:

https://www.knowingandmaking.com/2009/12/bankers-bonuses-two-solutions.html

Although on the surface it is a political issue, it reveals a deeper economic problem which underlies the banking sector. Fortunately the government, with its effective control over RBS and Lloyds, is in a unique position to do something about this.

Sorry RP- what about UK Financial Investments Ltd?

What exactly are they there for again?

The bonuses will have to be paid. I'm virtually certain there will be individual contractual rights to bonuses anyway with the high rollers.

But why on earth is Darling messing with this? The board have to pay what is necessary to retain top people. Those same top people will assist in ensuring that the tax payer get their money back. Getting the taxpayers money back will result in us mere mortals suffering fewer/not as dramatic tax rises and we will therefore spend more/have more disposable income leading (hopefully) to recovery.

AD will announce (if at all), at the same time as something far more interesting- (in the hope that it is lost in other news of the day)- that the bonuses will be paid but that he's going to do everything possible to ensure that they don't have to be again or that there's an industry wide duty to investigate and reassess future bonus payments...i'm thinking of a 'We need a global consensus' type speech/press release, hidden at the same time as the yachtsmen return or something similar. He will then try to tap uncle sam on the shoulder to be heard and will promptly find himself utterly ignored.

But it won't be his problem for long.

Surely this is a no-brainer. If Gordon and Alistair want to win the next election, they just say Go Ahead Punk Make My Day, and accept the resignations immediately. What are they waiting for? Are they politicians answerable to the electorate, or are they puppets of the great American Money-Machine in the Sky?
Their in/action/s on this one will be conclusive one way or the other.
They are already shamed by Vince saying it before they've done it.

I'm actually for this bonus payment, let’s not mix politics with the truth, the division in question produced sterling results and they should be rewarded for that. The mistake was never excessive bonuses; it was how those bonuses were paid.

As long as those bonuses are paid with a long term mindset then the people they are incentivising should produce good (in something more than the short term) results. Let’s not forget that these people have to dig RBS out of its hole so it can pay back the taxpayer.

No I'm not a banker.

So a banker not paid a £10m bonus will move to another job. Are there that many such jobs? I woud value some analysis from Robert on the job market for bankers.

This comment was removed because the moderators found it broke the house rules. Explain.

The very fact that the RBS board is even considering paying any bonuses should be sufficient for them to be fired.

Now that we have all discovered over the past couple of years, todays trading profits are tomorrows disasterous losses, i fail to see why the board or anyone is even considering paying out a bonus. What happened to taking a longer term view. It is morally repugnant to most ordinary people that the bankers should receive a penny in bonus this year.

Give us back our money. Resign already. How hard will it be to find more greedy fools.

Sorry but what are these bonuses meant to incentivise? Nothing but what went wrong in the first place.
I'm sure the electorate is in favour of having responsibly-run banks, and why would temporary nationalisation be such a dirty phrase? Or democracy a dirty word?
Let's have banks that are banks, and betting-shops that are betting-shops. So all the cowboys migrate to America - so what? Best place for them. I'd rather have Capt Mainwaring in charge of the place I put my dosh, and in charge of judging my fitness for a loan.

It's pretty certain that many of those receiving bonus's at the higher levels are not resident in the UK and do not personally contribute to UK tax. Probably all the rest are non doms who pay £30000 and prop up the upper end of London domestic property market and luxury (but not good) restaurants . Most of the rest of the bonus will be 'invested' ( but where) The question is what does the investment side of the operation actually contribute to the UK economy in cash flow?

What would be the result of shifting them all to Wall Street to support the property market in Connecticut. If it is so profitable but cash poor let RBS sell it to the employees and repay the tax payers .

What does the Cameroon say?

It's a small wonder that the Bankers in the US have resorted to carrying hand guns!

Here in the UK they'll need to carry machine guns if this issue is not resolved.

You'll just love this story btw...

Barclays banker Hugh McGee wants son's teacher fired for 'sleazeball' comment
https://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6712738/Barclays-banker-Hugh-McGee-wants-sons-teacher-fired-for-sleazeball-comment.html

And then there's The Market. I love the way we are all supposed to be At The Mercy of It. It's supposed to be a ruthless Mistress rather in the image of Mrs T all those years back (thank god).

But in what ruthless market-place do you blackmail someone by saying "We made a complete balls of your money last year. If you don't let us do what we want, we'll go away and never do it to you again"?

And seriously - there aren't perfectly good bankers out there (or in there) just dying to take the places of these people and prepared to hang on in there for better times? What Marketplace lacks its own next generation?

The constant linking of huge bonuses with quality employees is, and has been proven to be, totally fallacious. Sir Fred Goodwin wasn't exactly quality was he? Actually he was a pompous tyrant if all one reads is true. So I say huge bonuses attract the worst people. Is that what is called heresy nowadays?

As i said yesterday, surely anybody who was any good or expecting hugh bonuses from RBS would have left already.

As i have said seemingly everyday this year, the culture of banks will not change without Nationalisation.

The philosophy of non execs and boards saying that we need to pay our boys a little bit more than our competitors is the reason bankers and senior executives pay has risen to rediculous levels

does anyone think that after receiving a massive bonus the "Loyal" RBS staff who could leave, will not do so for a few dollars more anyway.

If investment banks want staff to be loyal in the long run then maybe they should be loyal back to them by not running them into the ground over a few years.

To the people who say we have invested in RBS we did not, we bailed out a colapsed company, the taxpayer had as much say over this as going to war. The pepole seeking excessive bonuses fail to mention how uncompetitive this was.

RBS have said that the bonuses are being paid to those who helped make a profit of 6bn surely they mean that these employees have reduced the banks losses by 6bn. Most of us face an uncertain future in the comming months. My "Bonus" this year is to keep my job. I would suggest the "Banking Talent" consider this deeply. And frankly if you dont like it at RBS then clear off.

Ok, so let me get this right:

The bank's majority shareholder is telling the bank it cannot pay bonuses.

The banks board says it has a legal obligation to its shareholders to pay bonuses, so because the main shareholder is telling them not to they have to resign.

So effectively they have a legal obligation to us (the taxpayers) to do the exact opposite of what we want.

just when you thought it couldn't get any crazier...

It's quite obvious from the volume of comments yesterday that this is something that people feel very strongly about. It's also apparent that the RBS directors and their fellow banksters are completely out of touch, far removed from any notion of fairness or equity.

Alistair Darling, your duty is clear. Call the banksters' bluff and reap the reward at the coming election.

Tackling the problem by trying to control bonuses is unlikely to succeed and is anyway missing the point.

The reason that financial institutions can pay such high levels of remuneration (salary/bonus whatever) is that it is excessively profitable for the risk it takes. And given excess profits, a substantial percentage is given to employees (we would applaud this division of the spoils in other industries!).

The fundamental issue to tackle is the excess proftability. This arises either because fees are too high (or operating costs are too low). In (almost) any other industry this state of affairs would not persist for very long as competitive forces started to act to drive down pricing. However, the financial markets are a cartel where very little real competition exists.

It is also arguable that the costs that much of the banking sector incur to not reflect the true costs of running the business. As others have pointed out, the banks have not had to pay historically for the implicit guarantee from the State. While it is bad for the State to subsidise clearing banks' costs, it is outrageous that investment banking arms should have this effective subsidy.

The tools required to address the problem are:
- a new Glass-Steagall act in all jurisdictions to divide investment banking from other commercial banking activities
- anti-Trust action to introduce real competition which acts for the benefit of customers (industrial, commercial and private)
- a system of charging for the implicit Govt guarantees on banks (excluding investment banks where such protection is inappropriate)
- enforced higher capital ratios to force banks to adequately manage their risk before recourse to State support

if all bankers move to the US due to bonus limits here and europe then obviously there will be surplus bankers (as if there weren't already) in the US and the jobs market there would naturally lower the bonus paid there.
win - win

would be interesting experiment to see if we actually need bankers to run banks anyway.

Sorry, I don't buy the argument that we have to pay top dollar.

Firstly, who are the bonuses aimed at? Big money would suggest Forex traders and investment bankers - who else would receive big bonuses?

Investment bankers can hardly fail, given theirt ability to use funds which cost 0.5% (ie bank savers) and they can dish out at 8%. So no need for bonuses or great brains here then. However,

a) How many vacant jobs are there for investment bankers worldwide?
b) are these top earners really the ones who do the investment banking?
c) How many merely supervise the guys who do the job?

As for Forex traders, this is simply a mixture of a certain amount of acumen, having studied trends, history etc and a hell of a lot of good luck. I suspect most bank directors have little real idea of what these guys get up to. However,

a) How difficult is the job, given that computers provide virtually all
the information required at the touch of a button?
b) What is the difference between a gambler at a casino and an
Forex trader (except that the taxpayer picks up ones losses)?

Clive

ps for anyone saying that bonuses are a reward for marginal value they are not.

it would be interesting to know how many of the six, seven or eight figure bonuses are going to people from elite public schools or people from well to do backgrounds rather than those who have risen through the ranks as being the "cream of the crop"

The second reason banks pay high bonuses to a few is for the many pawns to think "well if that guy can get crazy bonuses then so can i one day". This whole mind game requires the receipiant not to be the cream but an average bank man for everyone to relate to to work.

I don't think I'm particularly hard-hearted, but do I feel a scintilla of sympathy for the chancellor? Not based on what you've written Robert. Why? Because of...

"Or to put it another way, he could have said what is actually true in company law and the stock exchange listing agreement, that bonuses are a matter for RBS's board.

But presumably he didn't think that would wash with voters, even if it's actually true."

That last sentence is sickening. It's the very essence of what is wrong with politicians as a breed: assuming that we, the voters, are too stupid to be able to detach reason from emotion, that we are incapable of considering the facts as more important than any feelings of wrongness or injustice we might have. That's an insult on a scale the makes anything any banker has done pale into insignificance.

That failing has been around in politicians for far longer than the banking crisis and I am sure will still be around long after we've forgotten there ever was a banking crisis. Sympathy for Alistair Darling? Pull the other one!

Labour is missing such an open goal here. they need to shin it in off the post (arriving too late in the box to make it look any better) - then watch Posh Dave try to keep his fatcat constituency onside!

Robert,

Any chance you could obtain and publish, via a link, a sample (anonymous) job spec and detailed remuneration package (including bonus derivation) for a Forex trader and an investment banker?

Clive

New reality TV show idea.

Investment bankers appear on telly to justify why they should get their obscene pay and bonus.

At end of programme viewers get opportunity to vote on whether or not they should get their bonus or be sacked - no middle ground.

I think this might help the City folk get in touch with the feelings of people in the real world outside the City where poverty has now reached the level it was at 10 years ago in this country and is not getting better.

The show could be called 'Banker or Ranker' and would be presented by Jonathan Ross.

"... there's a very strong intellectual case for saying no bank (apart from, for example, Barclays and HSBC which didn't take government handouts but went looking for their own money) should pay a bonus for 2009, which is that

1. none of them (apart from, for example, Barclays and HSBC which didn't take government handouts but went looking for their own money) would be alive today in the absence of that $15 trillion bailout I've been boring on about"

There - fixed that for you.

10 Grumpynotoldman

I sympathise with your position. I've spent far too much time reading these blogs and it's frustrating to waste your efforts.

The real solution is to create an alternative political party. It's not that expensive to set up a party (£150) and field candidates (£500) but of course does require a great deal of effort and some backers. Who knows, could be the first internet party (although Barack Obamha might have got the concept first)

https://news.bbc.co.uk/1/hi/uk_politics/7963814.stm

This (the directors' position) is a naked power-play, by the way, regardless of its nonsense.

"Let us do what we want or the whole of speculative capitalism will leave you to twist in the wind."

If the Government bends to this, we may as well not have a "government" at all.

The biggest bullies are the ones who think they need to make the least sense.

So the directors of RBS will resign if they are not allowed to pay their senior management excessive bonuses........
Yes....so...let them resign.
Try getting a job in the U.S.A. where there is 10% un-employment. I think they will find it more difficult if not impossible!
Let them find equal employment in any part of the world.
You'll find that most employers are not interested in paying large salaries and bonuses for failure.
So....go ahead...resign....and join the long line of 2.5million un-employed.
Please....and then let's see what your local job center has to say on a cold and wet Monday morning.

If you've got any bank shares, I'd recommend selling them PDQ!

The only way I can see this being resolved is by nationalisation of the entire banking system in the UK.

They say Gordon's appeared a bit more chipper of late...Nationalisation of the UK banking system would guarantee him winning the next election AND provide him with an enduring legacy that Blair could only have dreamed of.

What I don't understand is how the banks can justify paying such large bonuses as a percentage of their profits. Surely if a bank is paying 1.5bn as bonuses vs a profit of 1.5bn. Surely the shareholders (pension funds) should be kicking up a stink purely on self interested grounds...

Especially as there have been various studies done comparing traders with random trading, and on average they don't do much better.

37. At 11:46am on 03 Dec 2009, U13457721 wrote:
"New reality TV show idea.

Investment bankers appear on telly to justify why they should get their obscene pay and bonus.

At end of programme viewers get opportunity to vote on whether or not they should get their bonus or be sacked - no middle ground."

Or better still, executed - just like in a recent episode of Spooks....

So they've threatened to resign. Oh noes, what shall we do?

Wave goodbye would be my suggestion.

16. At 10:51am on 03 Dec 2009, U8272616
-----------------------------
Anyone who can use the word "incentivising" is not part of the real world but from an ever more distant planet of corporate speak. I immediately cannot take you seriously.

So the heads of all these companies hold private meetings twice per year, not for an awards ceremony or some charity ball but to discuss their mutual business.

Cartel is the word that this is screaming - refer the lot of them to the European competition commision and use the US anti-trust laws to break this secrective little collective apart.

The bonuses are only a portion of the profit generated by the individual bankers for the likes of RBS. What I don't understand is why we aren't all at it, trading these investments and earning a fortune. That's what normally happens in an open market when there are very large sums to be made. Oh, it must be this is a cosy cartel, an exclusive club that only banks can belong to and the entrance for newcomers is made too onerous. That seems ripe for a monopolies commission enquiry.

The problems RBS present are a once in a life-time chance for the government to retain majority ownership and direct investment to where it is needed, into industries and new ideas which will form a platform for the future prosperity of this country. A national bank for reconstruction to coin a phrase from years ago.

And whats all this with the Lloyds rights issue. I had 1000 shares of 25p and must have missed some of the detail due to the indecent haste with which this matter was handled by Lloyds. And no wonder. I had not twigged that the shares would be subdivided and then I would be offered the chance to buy shares I already owned at 37p each. And not 1500 but only 1340 shares. If the shares are subdivided then I should now have 2500 at nil cost to me. Is this legal?

Anyway, the RBS bonuses look as f they will have to be allocated and Darling, with whom I sympathise, will have to dress it up somehow.

Hi Robert,
You're (and the directors) whole premis is based on one rather large flaw. If the taxpayer had not generously stepped in and saved the banks (and that includes Goldman Sachs were greed it would appear has returned in a rather excessive, rampant and distasteful fashion) then even the top forex traders would not have have a company to work for. So even though they have had a good year, they would have had a very bad year signing up on the unemployment lines, if their backsides had not been covered by our largess. So I think it is time for the 'Big Swinging D**ks' to eat a bit of humble pie and accept a cap on their pay until such time as their companies have paid back all the debt they racked up

Let the board and all resign. What everyone forgets is that the bankers are taking enormous risks with the shareholders money - did any of the bankers pay back when the bank lost billions - NO?
Whay should Darling alone decide - it is the taxpayers money and the public says NO bonus.

Simple solution: however much they award themselves in bonuses should be deducted from any further handouts from the taxpayer (which, considering the recent secret bailouts, seems quite likely).

If the bankers pay themselves £2 billion, keep £2 billion back from taxpayer support. That way they would need to work harder to recoup that cost which would, in turn, increase the share prices and shorten the period during which the taxpayer would need to keep them afloat.

I do not get why the bankers can do what they like and make absurd threats to the Treasury. We can choose not to cooperate with their every unreasonable demand.

I appear to be missing something. These banking fat cats have skills that are so valuable to RBS that they can collectively hold their employer to a 10-figure sum ransom.

These same fat cats made lots of money for the bank when times were good, but brought it to the brink of collapse when the tide turned.

Surely any monkey in a suit can make money during good times and lose it in bad times? So just how special are the special gifts of these individuals? If the RBS board still don't know the answer to this question, the sooner they resign, the better.

Surely Alistair Darling is acting as a "Shadow Director" under the definitions within the companies act?

Clearly I'm missing something - the RBS board have to act in accordance with shareholders instructions. I don't see why the largest (and controlling) shareholder can't place a motion at the AGM banning all bonus payments to staff earning £20k or more and then vote it through. The board are bound by the motion and have executed their legal duties by acting in accordance with the instructions of their shareholders.
There's no legal requirement that I'm aware of for shareholders to act in a fashion that preserves the value of their shareholding (unlike, as correctly stared by the RBS Board, for them), i.e. there's no law against being stupid (just as well I suppose). If the shareholders choose to pass such a motion and undermine the alleged value of the bank, then so be it. Who knows, by taking a morrally correct stand the RBS might even drive the shareholder value up by drawing in new customers who believe that this might now be a bank that they can trust again.
While I'm sympathetic to the RBS' plight of retaining staff, there is the harsh reality that without the UK taxpayer most, if not all, of these staff would be currently unemployed. It saddens me that even after all that has happened that these people still have very little connection with reality. It is this type of behaviour that has tarred all banking staff with the same brush - perhaps a little more humility and gratefulness to the wider populus would go a long way. Let's see how this plays out and it will be intersting to see who still has a job next summer - the board of the RBS, Gordon & Alastair or none of them (although I suspect I know the answer).

This situation is all down to poor or no regulation from the government, it is they who should be forced to resign, and get some people in who are competent to tackle this problem.

#37 "Banker or Ranker" with Jonathan Ross - hilarious! And a wonderful, practical solution that would give (almost) everyone a bonus.

On another note, how could it possibly ever be in the bank's interest to pay a trader more than a million pounds rather than train someone else to do the same job for half as much? What amazing non-transmissible skills do these people have? Rocket scientists and brain surgeons work for a lot less, and are replaceable if they demand insane salaries! Or is it not the skills, but the illegal inside information and shady network of contacts that is irreplaceable?

Barclays have found a novel way around the issue of investment bankers bonuses.

https://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6712983/Barclays-bankers-to-get-150pc-pay-rise.html

A number of people have raised the question why is the board threatening to resign over the bonus issue. If people will allow I shall elaborate.

As a director of a company, particularly a public company the directors have a responsibility to act in the best interests of the shareholders. Failure to do so can and does open them up to the possibility of legal action and financial penalties, disqualification from acting as a director and in theory jail. The link below regarding the issues at Siemens rather nicely illuminates the issue further.

https://news.bbc.co.uk/1/hi/business/8390565.stm

The directors believe that it is in the best interests of the shareholders to pay the bonuses as they believe that otherwise the best staff will leave. Several people have pointed out that if the "big earners" don't get rewarded then they will leave and the bank's future profits and income will fall.

In many ways the scenario is very similar to the current position in Premier League football where the argument is that unless players get huge pay levels they will leave for someone who will pay them more. The club fears lack of qualification for the champions league or relegation from the Premier League if they don't give in to the players. There is a growing case law for constructive dismissal if senior managers views are overriden such as the cases with Kevin Keegan and Alan Curbishley at Newcastle and West Ham respectively.

https://news.bbc.co.uk/sport1/hi/football/teams/w/west_ham_utd/8340584.stm

The directors fears are that if their intended actions are vetoed by Alistair Darling then they are left with little option but to resign as they clearly are not in a position to manage the business as they believe they should.

It could be a bluff, it could be blackmail or even just an opening gambit over who actually runs RBS.

As Noel Edmonds would say. "Alistair you have heard the bankers offer... deal or no deal".

Having worked in banking, broking and fund management for 33 years, I think it is time someone pointed out that the emperor has no clothes - the system does not depend on a practice of paying enormous bonuses that completely ignores the relative importance of the two inputs: capital and trading skills.

In all these organisations there are able, younger people eager to take the place of departing "high fliers" and in the market in general there are able older people whose motivation does not depend on exorbitant bonuses. The problem is that the RBS Board (which is generously rewarded) has a vested interest, as do most bank managements, in maintaining the status quo. For the same reason they are loathe to split traditional banking from "casino banking" - although such a move would make it much easier for shareholders to set the level of risk they can accept and the appropriate return for capital and labour.

The government has an amazing opportunity to change the rules of the game for the better - and what's more it would play well politically even if I cannot regard myself as a natural supporter of Mr Brown.

This threat is simply proof that these bankers have no professional or moral integrity.
Does the phrase "I have enough money" have the force of Kryptonite on their egos?
The Government absolutely must veto all and any bonus payments.
Perhaps as taxpayers, those of us who can, should refuse to pay tax if the payments are approved.
May I ask that these 'bankers' be named and shamed.
As for "Top Talent". That is laughable, the world is full of accountants and bureaucrats able to read a spreadsheet, write a report and knock up a power point presentation. Let the ungracious, selfish resign.

These bankers really have lost touch with all sense of decency.

1) they would have bankrupted their bank with their greed fuelled reckless investments, had the govt not come in and rescued it with OUR money.
2) central banks around the world have been forced to print money and prop up their parts of the global system.
3) the money printed and poured into the system has resulted in profits
4) the bankers now demand a share of those profits for themselves.

Where were the bankers demanding they should have to chip in billions to rescue RBS and the other banks last year? No one handed back the bonuses they'd earned along the way to bankrupting their banks did they?

These guys demand bonuses when their gambles make a profit, but demand govt bailouts when their gambles go bad.

Let them resign. I suspect we'll not notice the difference if they all disappear off to bankrupt someone else's business.

#38 i would say there is still strong argument to pay pay excessive bonuses to Barclays or HSBC as they kept the option of Government funding in the back pocket.

If RBS want a level plaing field the it should be 98% tax band on all bankers bonuses over £100k until the bailing out debt is fully repaid

As several people have pointed out, there can only be so many "top jobs".

Also, I seem to recall RP's analysis of banking returns a month or two ago where he demonstrated that profit rates on banking investments had been pretty much consistent over time, it was primarily due to a vast increase in capital ratios that overall profitability had increased, but as we are now well aware, that comes with an inherent risk.

The question then is how much value do these high flying individual bankers actually add, especially as economic circumstances and governemt action seem to be amongst the most important factors for profitability.

Should the US be the only country refusing to agree on limiting bonuses, there would appear to be a case for levelling the subsequent playing field by making dealing with such US institutions less desirable to the rest of the world, although of course some could call such moves protectionism, if the rest of the world were united, the US with its fragile economy may eventually find it in its interests to tow the line.

Let's get this straight.

Unless RBS bribes some of its employees, they will quit and go off to their competitors.

I think that since this is state -owned bank that the Government should test that theory. Remember this is the same bank that conned the Government into paying a huge pension to Sir Fred Goodwin, so let's not accept what they say at face value.

re 61 meant to say not to pay!

Politically this is a no-brainer for the Chancellor.

Declare that all bonuses on a 70% state owned bank are void, let the RBS board resign and then comment how those greedy bankers were just trying to protect their own. In the face of the current recession and political climate, the opinion polls will only climb in his favour.

Of course, the financial angle may need some working through ...

"Now, let's be clear: the idea that banks would ever collude to solve a mutual problem would be an outrageous and unwarranted slur. Collusive tendencies may have been in bankers' DNA two decades ago, but these days (who can doubt?) it's all about compete or die."

Mr Peston, banks quite publically collude and cooperate all of the time - the creation of ne European trading venues to drive down the cost of trading on stock exchanges is just one example. The Fed in the US is another. They frequently work together in the most non-competitive ways.

Retail banks don't compete for customers, as customers almost never move banks. I'm not sure where the competition is in banking - collectively they all win. Individually they almost never lose.

One thing I know about leadership is as soon as someone threatens you, call their bluff, if you possibly can. If you can't, work all out on this as the only project in the world and then jump on them as hard as you possibly can. Also making it clear to them that that is what you are doing.

What heroic, principled bankers, putting their own jobs on the line to protect those noble bonuses. Funny how rarely the ordinary bank clerk, with a mortgage to pay and a family to keep, indulges in such histrionics. Could it be because those top bankers are so disgustingly, filthy rich they do not need a job any more. So yes, let them resign but hammer the so and sos with a punitive retrospective tax before they run off to America or wherever they propose to take their talents and honourable principles.

Yaaaaawwwwwnnnnnn ... Another case of Mr. Peston using a convenient headline to build a grossly misleading picture. Robert, I work in one of the banks you so much deride and incite the public to deride (do not forget I also pay taxes). I have never known ANYBODY in my vicinity earn anywhere near a $20m bonus or ANYWHERE near it (and I have been 17 years in investment banking). Why do you need to peg your hat on this eye catching figure when it is so grossly misleading? Why do you also conveniently ignore that the taxpayer is making a significant return on the terms upon which the banks have been rescued (including the APS). Is there a worthy moral debate about bonuses: yes, absolutely. Should it be a responsible debate rather than a jingoistic one (ie you) or election driven one (ie the government): yes. None of us who have worked long and hard in banking are averse to the moral debate but nor should we be tarred with a brush which is not applicable to us(the toxic problems related to a minority part of the banks). Show some professional integrity rather than headline grabbing soundbites. There are many good observations in this forum and way too many which are woefully ill-informed by your skewed blog. As for my views, I have always felt that investment banking and retail banking should be separate. The abolishment of the Glass-Steagall Act was a mistake and there were many other regulatory ones too. It wasn't just the banks that created the mess nor is joe-public-three-mortgages-for-buy-to-let any less culpable. Time to stop jumpig on bandwagons Mr Peston.

Hopefully the boards of several banks will resign and moves will be made to ensure they don't receive exhorbitant pay offs when they go.

Members of the same "club" within the supreme court have already decided to interpret the law and the role of the FSA in favour of "their own", and of course with the lawyers providing the "resignation" advice being employed by the bank, there would be no way that their legal adivce could be biased toward ssupporting the agenda the banks executives want to pursue would there?

Unfortunately, the upper echelons of society (whether they be political, legal, etc.) are closely tied to the banking sector and consider the banks to be part of the fabric odf society and the bankers to be amongst "their own", as such expecting a real stand against the banks and their operations is probably a false hope.

btw: I note that RP mentioned that banks would be unlikely to collude when mentioning the meeting of their elite "club", was this said with a degree irony?
After all such meetings (and organisations such as the BBA) are designed to benefit the members, and as they continue, no doubt provide some benefit, there is a fine line between "agreeing common goals" and collusion amounting to cartel operations, and the banks mange to conduct such activities in a way that is either legal or at least provides insufficient evidence for proceedings.
Although of course it would be naive to think that such meetings are designed to profit anyone but the banks and bankers themselves, anyone thinking they are intended to be in the interests of consumers and taxpayers is sadly deluded.

Why should anyone get a bonus just for doing their job? My bonus is to not lose my job! If it hadn't been for the massive taxpayer bailout, all of these highly paid money-shufflers and gamblers (for that is all they are) would be unemployed.

The bigger question, of course, is what value - globally - do investment banks add? All they are doing is shuffling money around, so if one bank wins, you can be sure that another bank is losing. They do not add any value. The western world has become obsessed with the Financial sector being king, whereas the sectors that actually generate wealth (largely Engineering, Scientific Research, Techonology and Construction) have been more-or-less abandoned. These are the industries that will drive us forward into the future, not the bankers! The obscene sums of money wasted on shoring up failed banks would have been far better invested in dealing with the (most likely) irreversable climate change.

Alistair Darling should just let the directors resign. I am sure that there are many more perfectly capable people elsewhere within RBS that could do their jobs just as well, if not better given recent history.

Is anyone analysing the weights of opinion in this blog?

If so, please put me down in the category of those posters who argue that the Government must indeed veto the payment of bonuses. Call the bankers' bluff ... and let the lot of them go to hell in a handcart.

We simply do not need merchant bankers who play fast and loose with our money (or printed money), make fiat/ponzi profits, call themselves masters of the universe and fleece ordinary serfs like me of our genuinely, hard-earned wages in order to bank million pound bonuses - for doing what exactly?

Are we all getting more prosperous as a result? Not according to this analysis: https://tinyurl.com/yj3evk4

The situation is immoral. Can the politicos not see this simple fact?

There needs to be (peaceful) street protest on this matter if the politicians fail to understand polite discourse in the media. Ordinary people are being taken for a ride by what is little less than a banking-political mafia.

Let them resign.Who in their right mind would employ them.They have run a billion pound bank into the ground.Tax payers own this bank.Not them.If it was not for the government they would of been unemployed a long time ago.Wake up and smell your coffee.British soldiers are risking their lives in Afghanistan for an extra £13 pound aday.Do us all a favour and Resign.Maybe then the RBS will turn back into a profit making bank.A disgruntled RBS Account holder

It is reassuring to note that the bankers have a trade union.

Are they affiliated to the TUC?

Since they are now a nationalised industry they should join in solidarity with the postal workers who are also suffering from too much government interference.

Why have some of us been reduced to just being numbers? I am not a number I am a free man!

stanilic

The UK was once the workshop of the world, but now the economy depends on banking and other financial services. The big money maker in this area is trading. Trading includes currency trading, which is basically speculating on the ups and downs of exchange rates. Having moved house between Euro, Sterling and Dollar areas and seen my life savings ‘fall in value’ in a few days by more than I earn in a year, I can understand that it’s possible to make a lot of cash by this kind of ‘trading’.

But, what use is it? As an old engineer used to ask, ‘How will it reduce the price of sugar in the shop?’

If this is what our banks do and is the backbone of the British economy, I feel ashamed.

The argument is that these traders and bankers have us by the throat. If we throw them out, we wipe out what economy we have. In that case, we have to do a deal with them. Let them have some bonuses on the condition that the banks pay some proportionate (and very large) amount into funds for new businesses and small and medium manufacturers.

I seem to recall that RBS were less than an hour away from having to freeze bank accounts and shut cash machines.

Yet they want to pay bonuses!!!

The money should go to the poorly paid retail staff and customers who go overdrawn by £35 when charged for returning a £10 DD.

It's about time RBS learned about customer services!

Why on earth should anyone feel sympathy for the Chancellor - this whole mess is entirely of his own making.

It was almost as if he had a political suicide wish to have constructed such an entirely predictable situation from which he could only lose.

The court of public opinion may well be with him now, but when the banks mullered and it dawns on the public that they will never ever get back the billions lent to RBS and the theroetical loss has been translated into an actual real one - the fury will be as nothing compared to this.

Hold your nose and pay the bonuses or start winding the whole bank up now. I know, its horrible, the government are so naive.

But paying civil servant salaries will result in complete amateurs at the controls of our largest bank. Lambs to the slaughter.

The board are showing you the looming exodus of bankers that is probably already happening.

And, yes, there is a market for traders, analysts that decide to abandon our new Leyland Bank.

No one seems to be pointing out that the reason these 'talented' bankers are generating such large profits is because they have the bank and its deposits/capital behind them. Lack of competition is another reason

These bankers need that infrastructure to generate these profits - the traders are not generating the profit themselves.

However talented these bankers were they couldn't just set up on themselves and make these profits - if they could they would have left already.

The fact that aswell as the banks own infrastructure standing behind them the taxpayer does as well makes the situation even more galling!!!

The fact that RBS is so exposed to Dubai World is another important issue - I bet those that arranged those loans got massive bonuses at the time!

Money is not the only motivator in peoples lives - John Lewis and Waitrose pay there top people less than other retailers as there is a sense of working together - they work for the benefit of all employees not shareholders so they take a longer term view. JL please set up a bank to show it can be done in a different way - maybe you could bid for NR!

#69

I've never understood why you guys call yourselves investment bankers when you don't actually invest in anything.. How many new companies have you created in the last year that actually produce anything?

"High calibre bankers"? - do we have any? If so where are they and would they like to apply for the forthcoming vacancies on the RBS board?
Over the years working in the financial sector I've met a number of those at the top of at least one large financial organisation and I can't say I was ever at all impressed by the IQ or ability of any of them bar one, and he is now retired. There are plenty more fish in the sea that are the equal of those currently on top, but perhaps they are not greedy or over confident enough to apply. If any man or woman outside royalty needs millions to support their lifestyle there has to be something fundamentally wrong with them. Should people like this be in charge of anything?

18,

I heard that he DEMANDED the job!!! Like you say, he is not even elected but is practically RUNNING our COUNTRY!!!!

That's LABOUR for YOU!!!!!

Holding the country to ransom, mob rule, challenge to democracy. No, it's not 1984 and the NUM, it's 2009 and RBS. You reap what you sow.

#46

Can you please suggest a better word than "incentivising" to mean "motivating through financial incentives". I can't think of one.

Thanks

And where exactly would this bunch of RBS losers find alternative employment.

I agree with everyone's comments about controlling the power of investment bankers and their pay, only see one problem in the real greedy world where these guys and gals have their power base, like all crooks they are probably one step ahead of the law. In this case to keep ahead and preserve their obscene bonuses I am sure that at the first sign of a tightening of controls on their earnings they'll all be on the plane to Geneva or Zurich where they will be welcomed with open arms and their banks/hedge funds will be offered fantastic tax incentives by the Cantons out there. It's already happening with many of the global commodity companies having moved their entire European operations there in the past few years. So we take the moral high ground but shoot our economy in the foot as our overseas earnings go overseas! At least we won't have to blame the French.

74. At 12:53pm on 03 Dec 2009, U2347429 wrote
Why have some of us been reduced to just being numbers? I am not a number I am a free man!

stanilic
------------------------------

It could be a bug caused by this:
https://bbc.kongjiang.org/www.bbc.co.uk/blogs/bbcinternet/2009/12/bbc_id_name_change_to_30_chara.html

or it could be something else!

Alistair Darling should let the RBS board resign. I don't believe it would be very difficult to replace.

Note to all U's out there.

Please change Ure names so that we can follow (any) train of thought/opinion....

This reads like an Argos catalogue at the moment.

57# has summarised the legal position neatly

The point is that directors have to act in the best interests of all shareholders not merely the majority shareholder.

If the majority shareholder (ie govt) insists then two things could happen

1. (less likely) minority shareholders sue majority shareholder (govt) for unfair prejudice potentially resulting in a much bigger payment by govt than the bonuses were

2. (racing certainty) directors resign and lodge claim for constructive dismissal. RBS lawyers advise new board that RBS will lose (Kevin Keegan case is good example). RBS new board decide, entirely correctly, that it is better to negotiate than end up in court, and pay old directors a big severance package including Fred the Shred style pension arrangements.

In mean time key bankers at RBS do leave, but not as many as expected, but RBS finds that next year the divisions which the bankers who left were part of, make less money. Some of those divisions may be things that EU wants RBS to sell, so RBS has to confirm that the sale price has fallen probably by a lot more than the bonuses

Which bank exactly, would be happy to offer these guys a job any higher than tea boy, considering the total mess they had already made of their own bank?

Call their bluff... The bank was already mullered.

#80 Not a case of "you call yourselves", more a case of terminology used since the 1800s to distinguish retail banking activities from other non-retail banking activities. I couldn't care less other than it is clear that 99% can't actually distinguish between the two activities and that goes to the heart of the whole issue. The primary reason why events got to where they got over a build up of almost 20 years is because regulatoes and politicians consciously decided to abolish the separation of both activities, hence allowing retail banking capital bases to be used for the generation of higher risk activities. The motivations of traders, etc is the tip of the iceberg. These people (I am not on the trading side of the bank) behave in different way to salesmen on commission or bookies. The fundamental problem is that the regulatory framework has allowed them to rely on the capital of retail banks (ie deposits) rather than their own balance sheets as was the case before the abolition of the separation. You can either choose to understand the industry (which is in dire need of reform) or take the Mr. Peston approach, pluck numbers out of thin air, build a wonderfully tabloid-pleasing story and talk about "you guys", "fat cats", etc. The reality is that 99% of people in banking are no different to other people (ie they go to work to earn an honest and reasonable living). There comes a point when a debate isn't a worthy one if the srguments are based on false information or selective information.

Bonuses will of course be paid. A deal will be done and the majority will have to accept shares. Share price today is 34p. If prices recovered in 3 years to as little as two quid then a bonus of £500,000 would then be worth £2.9M.

By paying in shares the bankers that caused the melt down will profit from it yet again!

84#

Have a trawl through
https://www.plainenglish.co.uk/examples/management-speak.html

and then be an individual and choose your own real english words (try a thesaurus) as there are so many ways of putting it. Management speak is generally a lazy shorthand.

These are not brainy engineers or scientists, and we won't won't notice their departure much. Good riddance to bad rubbish. Now let's hope the rest of them quit as weel - it's a good chance to pull a lot of snouts out of the trough.

I have been trying to think of an easier business to run than a Bank.
No stock to carry, high demand for product from suppliers and consumers (lenders and borrowers) guaranteed government financial protection in event bad business decisions, fraud, employee corruption etc.
For persons working in such a simple, secure and protected industry bonuses should never be paid. Paying a wage adequate enough to attract honest reliable and competent people should to ensure the effective provision of an adequate banking service.

Senior bank members "colluding"? Surely this defines a cartel. As such, the matter must be investigated by the Competition Commission. Methinks that the Government will not want this to happen...

The bank is going tits up but they must get their pound of flesh.Let them go.........

how about a simple scheme where the taxpayers would only fully quarantee the operations of banks with particular bonus structure the more the banks deviate from the model the less the quarantee they will get. This will lessen the burdain on RBS of having to compete with other banks paying higher bonuses by reducing the risk involved. As a result customers/shareholders would prefer RBS as a more secure bank.
This will also slowly nudge the boards of other banks to move to lower bonus structure, without taking away the choice of higher bonuses for banks that want to increase their risk and potential profitability.
Finally we would end up with a few risk free retail banking institutions and some higher risk investment banks.

The ruling classes have just done yet another huge smash and grab raid on the public purse and have absolutely no interest in how unpopular it makes them.

We have just picked up their tab - the biggest in history - at no cost to them and they are now demanding their percentage for skimming off their cut of the frantic efforts our governments have been making to find the money on the capital markets to repair the damage. The governments are cramming gold into the mouths of the people who caused the catastrophe.

It makes the gouging of the taxpayer by the privatised utilities and the various state/defence assets flogged off cheap recently seem like a frivolous irrelevance.

You could see it as the biggest profit taking by the ruling classes they have ever managed.

For all the sneering comments from the bankers on the media about about 'public sector managers' supposed incompetence - how many trillions of bail out has ooh say the Post Office had. I mean in its entire existence?

How is it an asset to this country to have this lethal 'financial services' industry - a billion disasters created by incompetents whose only skill seems to be tax avoidance - running the show? We need to get back to making and doing things - the City is already up back to its usual trick of seeing any profitable UK company as a target for a hostile takeover with somebody else's money, and any decently run UK company looking for cash to invest can forget it.

Meantuime we will all be bled to pay for it, and for the next one, indefinitely.