Banker's Bonus Payments - A disgrace

[dune]

So how many secondary school history teachers does said friend pay for per anum?

[buctootim]

He actually "pays" more than 52%.

 

Employers will not base a bonus payment on the amount that the employee will receive but on the cost to the company.

 

The cost to the company will include employers NI at 12.8%.

 

If your friend's nominal bonus is £300k then the cost to the company is actually £338.4k

 

You friend will actually receive:

 

Cost to co: £338.4k

 

Less Employers NI: £38.4k

 

Gives Nominal bonus: £300k

 

Less Income tax at 50%: £150k

 

Less Emplyees NI at 2% (assuming paid after 5 April): £6k

 

Net pay: £144k

 

 

So the amount paid by the Co £348.4k

 

Amount received by your friend £144k

 

Effective tax rate: 59%

 

If you apply this rate accross the total bank bonuses for this year this represents a HUGE amount into HMRC's coffers.

 

Not an excessive return for the £850bn in support and guarantees the government has provided to UK banks to rescue them from their own bad business decsions.

[buctootim]

So how many secondary school history teachers does said friend pay for per anum?

 

...

Edited 13 January, 2011 by buctootim

[solentstars]

I think Dune's place as "Poster most likely to wind up Lefties" is under some serious competition.

 

makes you wonder how many right wings nutjobs we have who support the saints..

[dune]

...

 

Try googling average secondary teacher salary and then see how many times it goes into £348k.

[buctootim]

Try googling average secondary teacher salary and then see how many times it goes into £348k.

 

Try and divide £850bn of government support necessary to keep the bankers earning bonuses from collapsing their employers

[Pancake]

Try and divide £850bn of government support necessary to keep the bankers earning bonuses from collapsing their employers

 

You do realise that (a) the OP talked about Investment Banking and (b) the cost to the UK of a major Retail banking failing would dwarf the outlay form the Government in keeping them afloat.

[Verbal]

makes you wonder how many right wings nutjobs we have who support the saints..

 

Actually that question was starting to dawn on me. It is odd. Saints fans in the real world aren't anything like the twisting loons on here, though, thank god.

[dune]

You do realise that (a) the OP talked about Investment Banking and (b) the cost to the UK of a major Retail banking failing would dwarf the outlay form the Government in keeping them afloat.

 

And © it all happened on Labours watch.

[buctootim]

You do realise that (a) the OP talked about Investment Banking and (b) the cost to the UK of a major Retail banking failing would dwarf the outlay form the Government in keeping them afloat.

 

You do realise that a) all the major UK banks except Lloyds have (had) major investment banking arms b) Yes the Government had no choice but to keep them afloat, all the more reason to end the bonus culture which rewards excessive risk taking and leaves the taxpayer to pick up the tab when the bet goes wrong.

[dune]

You do realise that a) all the major UK banks except Lloyds have (had) major investment banking arms b) Yes the Government had no choice but to keep them afloat, all the more reason to end the bonus culture which rewards excessive risk taking and leaves the taxpayer to pick up the tab when the bet goes wrong.

 

You really need to engage your brain on this issue. Do you want London to lose out to Shanghai or Bombay?

[buctootim]

You really to engage your brain on this issue. Do you want London to lose out to Shanghai or Bombay?

 

Dune. In all seriousness I'd give more weight to Katie Price's views on investment banking than I would to yours. At least she has achieved something in life and had the occasional orginal thought.

[GenevaSaint]

You do realise that a) all the major UK banks except Lloyds have (had) major investment banking arms b) Yes the Government had no choice but to keep them afloat, all the more reason to end the bonus culture which rewards excessive risk taking and leaves the taxpayer to pick up the tab when the bet goes wrong.

 

His friend works for a us bank, no bailout from UK PLC.

 

PS. they didn't receive any money from USA PLC through choice, and have subsequently paid back everything they were given.

[Pancake]

You really to engage your brain on this issue. Do you want London to lose out to Shanghai or Bombay?

 

Exactly. You cut Bankers bonuses too much (and Im talking proper Bankers here; not counter staff, IT, Admin, HR et al) the UK will simply lose this and the business they generate. It's a fine fine line between proper governance and accountability, and over tightening and suffocation. Which is why I'm bloody glad I don't have to make those decisions and the Government (who-ever they are at the time) do. Im pretty sure, despite what is banded about on here from the far reaches of the left or right, that both major political parties would (and will) deal with Banks in relatively the same way. Both WILL make mistakes, and both will also make well judged decisions.

[dune]

Dune. In all seriousness I'd give more weight to Katie Price's views on investment banking than I would to yours. At least she has achieved something in life and had the occasional orginal thought.

 

You are having great difficulty justifying your argument and the reason for that is because you cannot justify it. You have a view, but you haven't even considered the implications. For that reason I conclude that you are very very thick.

[buctootim]

His friend works for a us bank, no bailout from UK PLC.

 

PS. they didn't receive any money from USA PLC through choice, and have subsequently paid back everything they were given.

 

Without knowing the bank involved its hard to be specific, but I'd be exteremely surprised if that bank werent benefitting from the continuing central banks provsion of guarantees and liquidity.

[Special K]

makes you wonder how many right wings nutjobs we have who support the saints..

 

There may be right wing nutjobs and left wing loonies, but as Saints fans they are our right wing nutjobs and left wing loonies, so by virtue of that we should cherish them.

[buctootim]

You are having great difficulty justifying your argument and the reason for that is because you cannot justify it. You have a view, but you haven't even considered the implications. For that reason I conclude that you are very very thick.

 

Dont bother Dune. You dont even understand the issues let alone the nuances of an argument.

[dune]

Exactly. You cut Bankers bonuses too much (and Im talking proper Bankers here; not counter staff, IT, Admin, HR et al) the UK will simply lose this and the business they generate. It's a fine fine line between proper governance and accountability, and over tightening and suffocation. Which is why I'm bloody glad I don't have to make those decisions and the Government (who-ever they are at the time) do. Im pretty sure, despite what is banded about on here from the far reaches of the left or right, that both major political parties would (and will) deal with Banks in relatively the same way. Both WILL make mistakes, and both will also make well judged decisions.

 

What the Conservatives need to do is to spell the situation out in simple terms so that people like Timbuctoo can understand. If we as a nation over tax the banks we will lose a collosal amount of tax revenue when the major banking groups up sticks to Shanghai or Bombay. these bankers bonuses are a drop in the ocean in the scheme of things.

[dune]

Dont bother Dune. You dont even understand the issues let alone the nuances of an argument.

 

Well from where i'm sitting i'm putting a case accross wheras you have nothing to say.

[Pancake]

Without knowing the bank involved its hard to be specific, but I'd be exteremely surprised if that bank werent benefitting from the continuing central banks provsion of guarantees and liquidity.

 

Without being funny... so ****ing what? The UK PLC (I detest that term) dont own any Banks, they have simply bought into them. Many private companies have large loans from Banks or investors; do they not pay hard working staff bonuses? No, of course they pay them, otherwise you risk losing your best staff and ****ing your business up.

[buctootim]

Exactly. You cut Bankers bonuses too much (and Im talking proper Bankers here; not counter staff, IT, Admin, HR et al) the UK will simply lose this and the business they generate. It's a fine fine line between proper governance and accountability, and over tightening and suffocation. Which is why I'm bloody glad I don't have to make those decisions and the Government (who-ever they are at the time) do. Im pretty sure, despite what is banded about on here from the far reaches of the left or right, that both major political parties would (and will) deal with Banks in relatively the same way. Both WILL make mistakes, and both will also make well judged decisions.

 

Im not against bankers bonuses. The trouble is that they are paid on short term results. The guys who developed derivatives based on US subprime made massive bonuses, with no doubt the majority moving on to other jobs and employers before it went sour. There should be some mechanism for long term clawback of bonuses if necessary; a firewall between investment banking and retail banking; and some kind of bonded insurance scheme so that future bailouts dont fall on the tax payer.

[franny]

Exactly. You cut Bankers bonuses too much (and Im talking proper Bankers here; not counter staff, IT, Admin, HR et al) the UK will simply lose this and the business they generate. It's a fine fine line between proper governance and accountability, and over tightening and suffocation. Which is why I'm bloody glad I don't have to make those decisions and the Government (who-ever they are at the time) do. Im pretty sure, despite what is banded about on here from the far reaches of the left or right, that both major political parties would (and will) deal with Banks in relatively the same way. Both WILL make mistakes, and both will also make well judged decisions.

 

Rational thought not welcome on here :)

[Pancake]

Im not against bankers bonuses. The trouble is that they are paid on short term results. The guys who developed derivatives based on US subprime made massive bonuses, with no doubt the majority moving on to other jobs and employers before it went sour. There should be some mechanism for long term clawback of bonuses if necessary; a firewall between investment banking and retail banking; and some kind of bonded insurance scheme so that future bailouts dont fall on the tax payer.

 

How can you not be against bankers bonuses when you "want to end" them? I agree that more governance should be put in place, as you say an insurance scheme to provide less tax-payer liability in future downturns is an excellent scheme and one that Im pretty sure was mooted by the BoE advisory panel a couple of years ago. Im not sure you can seperate the longterm/shortterm performance for bonuses though - an interesting idea all the same and I would LOVE to see an example in use elsewhere.

[buctootim]

Without being funny... so ****ing what? The UK PLC (I detest that term) dont own any Banks, they have simply bought into them. Many private companies have large loans from Banks or investors; do they not pay hard working staff bonuses? No, of course they pay them, otherwise you risk losing your best staff and ****ing your business up.

 

Many senior bankers are worried by the bonus culture which has become disconnected from real performance. This is just one example, David Blood ex CEO of Goldman Sachs Asset Management. You should read

 

"There are several well understood advantages inherent in capitalism that make it superior to any other system for organizing economic activity. It has proven to be far more efficient in the allocation of resources and the matching of supply with demand, far more effective at wealth creation, and far more conducive to high levels of freedom and political self-governance. At the most basic level, however, capitalism has become the world's economic ideology of choice primarily because it demonstrably unlocks a higher fraction of the human potential with ubiquitous organic incentives that reward hard work, ingenuity and innovation.

 

For these reasons and others, markets lie at the foundation of every successful economy. Yet the recent crisis in global markets (following other significant market dislocations in 1994, 1997, 1998 and in 2000-2001), has shaken the world's confidence in the way modern capitalism is now operating.

 

Moreover, glaring and worsening systemic failures—such as growing income inequality, high levels of unemployment, public and private indebtedness, chronic under-investment in education and public health, persistent extreme poverty in developing nations and, most importantly, the reckless inattention to the worsening climate crisis—are among the factors that have led many to ask: What type of capitalism will maximize sustainable economic growth? At the very least, the last decade has clearly demonstrated that free and unfettered markets, as they are currently operating, have simply not been delivering optimal long-term results.

 

Before the crisis and since, we (and others) have called for a more long-term and responsible form of capitalism—what we call "sustainable capitalism." Sustainable capitalism seeks to maximize long-term value creation. It explicitly integrates environmental, social and governance (ESG) factors into strategy, the measurement of outputs, and the assessment of both risks and opportunities. Sustainable capitalism challenges us to generate financial return in a long-term and responsible manner.

 

Precisely because the energy unlocked by incentives is the true source of capitalism's strength, we believe that the building of sustainable capitalism should start with careful attention to the nature and design of the incentives that businesses use and public policies encourage.

 

In his book, "The Big Short," Michael Lewis identified the real cause of the subprime mortgage debacle (which triggered the Great Recession) as one factor above all else: "Greed on Wall Street was a given—almost an obligation. The problem was the system of incentives that channeled the greed."

 

So how do we best motivate business leaders to manage for the long- term and compensate them for creating sustainable wealth? To begin with, compensation should be aligned with long-term objectives, and financial rewards should be linked to the period over which results are realized.

 

For example, in the asset-management industry, we are strong proponents of multiyear rolling performance fees in order to incent investors to manage assets with a long-term perspective. By contrast, if asset owners continue to review and reward their asset managers on a quarterly or annual basis, they should not be surprised to find their investment managers attempting to optimize returns within this time frame—frequently at the expense of long-term value. Unfortunately, this is all too common a practice for asset owners—even for pension funds, whose trustees are obligated to match the long-term performance of their assets to the long-term maturation of their liabilities.

 

In "Common Sense," Thomas Paine wrote, "A long habit of not thinking a thing is wrong, gives it a superficial appearance of being right." This is certainly true for compensation strategies in both business and finance. Our excessive focus on the short-term represents a primary obstacle to the development of sustainable capitalism.

 

Incentive structures should also reflect more complete measures of performance. For example, increasingly, best practice companies are explicitly including environmental sustainability, customer satisfaction, employee morale and workplace safety in their incentive schemes. These companies understand that these considerations drive long-term financial performance. We also feel strongly that if asset owners want their asset managers to consider ESG factors in investment decisions, then they should include these factors in evaluating, measuring and rewarding performance.

 

Ralph Waldo Emerson said, "The reward of a thing well done is to have done it." Countless doctors, nurses, teachers, firemen and policemen work tirelessly not only for the money, but for the satisfaction of doing their job well. In contrast, an overreliance on monetary incentives, often called the "bonus culture," for finance and senior corporate leaders has come at the expense of sustainable competitive strategies like team work, ethics, firm culture and long-term client relationships.

 

There is no question monetary incentives are important—indeed critical—but it is important also to consider other meaningful ways to motivate and engage work forces. In a recent book by George Akerlof and Rachel Kranton, "Identity Economics," the authors document how people in exceptional organizations work well because they identify with the values and the culture, not simply the financial rewards. Further, a recent survey by consulting firm McKinsey & Co. showed that nonfinancial motivators are more effective at building long-term employee engagement. Yet, somehow over the last decade we have let the "bonus culture" dominate our discourse and thinking on incentives. We can all see the results are not good.

 

Moreover, the rising inequality in our society is clearly unacceptable. It poses fundamental questions of fairness and whether these levels of income disparity are sustainable within the context of the long-term health and civility of our communities.

 

Business leaders, as well as compensation committees of boards, need to exert better leadership and shareholders must become more engaged in improving incentive structures. We strongly support "Say on Pay," whereby shareholders vote on the remuneration of executives, and other provisions championed by many institutional investors. We do not support government-mandated compensation caps or other prescribed compensation policies. However, if the business and investment communities do not act, governments may.

 

All of us in business and finance need to urgently rethink how we design and implement remuneration strategies. We need to get incentives right. They must be aligned with long-term objectives, reflect more complete measures of performance, include important nonfinancial motivators, and be equitable. This, coupled with a renewed commitment to long-term responsible business strategies that include environmental, social and governmental concerns, will be significant steps toward building sustainable capitalism

[Special K]

 

Many senior bankers are worried by the bonus culture which has become disconnected from real performance. This is just one example, David Blood ex CEO of Goldman Sachs Asset Management. You should read

 

"There are several /QUOTE]

 

The very same Goldman Sachs that were fined 550m$ for civil fraud charges and misleading investors? Oh ok, good that this quote wasn't just lip service then.......

[Pancake]

Very interesting read. This bit:

 

"Yet, somehow over the last decade we have let the "bonus culture" dominate our discourse and thinking on incentives. We can all see the results are not good."

 

Is of note. I dont think you can say the bonus culture is an ideal borne from itself. The whole ethos of the bonus culture, IMHO, is that of "cash = better quality of life", better quality that has, in recent years at least, come to meant full consumption of latest technological trends (be those electrical, transport etc). The whole "QoL" argument fell out of the mid-90's boom era where we, as a population, were exposed to more "life is better if you can afford it" than every before. [to go off an tangent dune will love, I believe this is due to the move to a "classless" society, but that's another discussion for another time]. To remove the though of that job rewards must be monetary is a huge task, and not one I think will happen within my working life (Im 32 fwiw).

[buctootim]

 

Many senior bankers are worried by the bonus culture which has become disconnected from real performance. This is just one example, David Blood ex CEO of Goldman Sachs Asset Management. You should read

 

"There are several /QUOTE]

 

The very same Goldman Sachs that were fined 550m$ for civil fraud charges and misleading investors? Oh ok, good that this quote wasn't just lip service then.......

 

tbf he ran the asset management division, not the part found guilty of malpractice - and he wrote that piece after becoming disenchanted with GS and setting up his own company. My point wasn't to defend GS but to point out that many senior people in the industry are concerned about the way the current system operates. Otherwise you just get tiresome ****s like Dune saying its all a socialist plot to screw everything up.

[Fuengirola Saint]

I agree with Dune.

 

Its like a screw, turning left undose everything turning right fixed.

 

Well it's obvious you're a Knob head like him as well isn't it? Learn to ****ing spell as well you illiterate fool

[buctootim]

Very interesting read. This bit:

 

"Yet, somehow over the last decade we have let the "bonus culture" dominate our discourse and thinking on incentives. We can all see the results are not good."

 

Is of note. I dont think you can say the bonus culture is an ideal borne from itself. The whole ethos of the bonus culture, IMHO, is that of "cash = better quality of life", better quality that has, in recent years at least, come to meant full consumption of latest technological trends (be those electrical, transport etc). The whole "QoL" argument fell out of the mid-90's boom era where we, as a population, were exposed to more "life is better if you can afford it" than every before. [to go off an tangent dune will love, I believe this is due to the move to a "classless" society, but that's another discussion for another time]. To remove the though of that job rewards must be monetary is a huge task, and not one I think will happen within my working life (Im 32 fwiw).

 

Thanks for taking the time to read it (I mean that genuinely, its offputting when someone posts something of that length up). My experience of investment bankers is that most of them live lives of deferred gratification - they work terrible hours with poor quality of life knowing that if they can get into reasonable career positions in 15 years they can earn enough to get the hell out and do something more enjoyable and rewarding (in other than financial terms). Chris Hohn, the hedgie behind CIF, is motivated solely by making money for charity. After making £100m money didnt turn him on any more. He now goes to work on the tube, lives in rented house and gives up to £500m pa to the foundation his wife runs. It doesnt have to be like that. Companies like Google have succeeded in part by attracting the best staff with excellent working conditions and their 'do no evil' mantra (which is in part synthetic, but like yours a discussion for another time)

[dune]

Well it's obvious you're a Knob head like him as well isn't it? Learn to ****ing spell as well you illiterate fool

 

Where's the full stop?

[Special K]

 

tbf he ran the asset management division, not the part found guilty of malpractice - and he wrote that piece after becoming disenchanted with GS and setting up his own company. My point wasn't to defend GS but to point out that many senior people in the industry are concerned about the way the current system operates. Otherwise you just get tiresome ****s like Dune saying its all a socialist plot to screw everything up.

 

Fair point. It will be interesting to see how much Mr Blood gets as a bonus from GIM for their quite remarkable recent profit deliveries.

[solentstars]

oh dear another thread ruined by the the right wing nutjobs:lol:

[Joensuu]

Where's the full stop?

 

Is it close to your colon?

[Saintandy666]

£144,000 is still more than enough money to get by on.

[Johnny Bognor]

There may be right wing nutjobs and left wing loonies, but as Saints fans they are our right wing nutjobs and left wing loonies, so by virtue of that we should cherish them.

 

Indeed. We may have differences in our political views and discuss them on here, but when it comes to footie, I would happily drink a beer with any of the left loonies on here.

[angelman]

Not an excessive return for the £850bn in support and guarantees the government has provided to UK banks to rescue them from their own bad business decsions.

 

Quite a good return given that this is a blanket tax and not just for those bailed out by us. Then you sort of write it (or maybe you don't) that this money is never going to be paid back to the government, or that no collateral was taken. Last I saw was a figure of HMG being up £20bn from it's bank bail out. I presume that this is somewhat simplistic and taken from the book value (so surprised not more), which would be unachievable I would have thought if the government started selling their shares. When these banks start paying a divvy, then I presume that will be worth having. Lloyds were paying at 11% before all the hoo-ha went on (or was it 14%?).

 

On a different point, what are the EU laws regarding state ownership. Is that only if HMG is majority?

[Joensuu]

Indeed. We may have differences in our political views and discuss them on here, but when it comes to footie, I would happily drink a beer with any of the left loonies on here.

 

What about all of us rational economic centralists? Or is this an exclusive club of the extremes?

[angelman]

What about all of us rational economic centralists? Or is this an exclusive club of the extremes?

 

economic centralists - hmmmm - would they buy a round?

[Johnny Bognor]

What about all of us rational economic centralists? Or is this an exclusive club of the extremes?

 

 

Considering I am at the centre of the political compass, I would drink a beer with any saints fan (on match days), left or right, liberal or authoritarian, so you are more than welcome.

[Sour Mash]

A good friend of mine that works for a well known Investment Bank in the City has been told his bonus today. over £300k, a record for him thanks to the hard graft on top of high intelligence and a knack of making his clients and his emplyers millions of pounds. The disgusting thing is that he will be paying 52% tax on it, bang out of order when the workshy types that can only be bothered to get a crappy job after failing at School pay less than 20%!

 

The top 1% of earners (anyone over £150k per year) will pay 27% of the tax in this country according to HMRC. If I was him I'd move to Switzerland!

 

I completely agree. The tax system in this country punishes you for working hard, taking risks, creating wealth, whereas the messages given out is, take it easy, sit on you're @rse and you'll be subsidised by the people working their balls off!

[Whitey Grandad]

It's people like Fred Goodwin that annoy me. He was responsible for the collapse of RBS and should have been dismissed for gross misconduct, not paid off with what any of us would call a fortune.

[trousers]

£144,000 is still more than enough money to get by on.

 

Paint a picture for me of a country that caps it's maxium wage at £144k.

[Joensuu]

economic centralists - hmmmm - would they buy a round?

 

So long as it is funded by the private sector (more cost effective), and regulated by the state(safe to consume).

 

 

Considering I am at the centre of the political compass, I would drink a beer with any saints fan (on match days), left or right, liberal or authoritarian, so you are more than welcome.

 

You are indeed close to the centre of an American political compass. In English terms that leaves you out in the cold with Dune. Still, I'd share a pint with any Saints fan, although wouldn't really want to spend too much time with the nutters like SISA or Stanley.

[Verbal]

Paint a picture for me of a country that caps it's maxium wage at £144k.

 

Socialist nirvana. You will be a happy trousers, able to turn to your fellow train passengers and feel at one in true communal bliss.

[skintsaint]

Paint a picture for me of a country that caps it's maxium wage at £144k.

 

Thought it was a bonus on top of his wages...?

[Joensuu]

Thought it was a bonus on top of his wages...?

 

Shhh, they don't like it when you point out their straw dummies...

[Deppo]

The inconvenient truth for socialists.... ;-)

 

Isn't it more of a convenient truth? I mean that is pretty much Karl Marx's 'Social Tank' in action right there. Bravo to the big bank communists paying what they should into the social tank! Bravo!

[Thorpe-le-Saint]

A good friend of mine that works for a well known Investment Bank in the City has been told his bonus today. over £300k, a record for him thanks to the hard graft on top of high intelligence and a knack of making his clients and his emplyers millions of pounds. The disgusting thing is that he will be paying 52% tax on it!

 

Good. It's ****ing ludicrous these financial criminals are allowed to have bonuses when the rest of the country suffers in part to having to bail them out.

[trousers]

Socialist nirvana. You will be a happy trousers, able to turn to your fellow train passengers and feel at one in true communal bliss.

 

:-)