From The Guardian:
Cracking down on bankers’ bonuses is a “moment of truth” for the coalition government, a leading Liberal Democrat has warned, amid mounting expectations that payments of at least £7bn will be awarded in the coming weeks…
Lord Oakeshott, a Liberal Democrat treasury spokesman, said this was a moment for the coalition to act, particularly on forcing more disclosure from banks on the amount they pay.
“This is the coalition’s moment of truth on fairness,” he said. “The first item on our coalition agreement is a promise to deal with unacceptable bankers’ bonuses. Secret bonuses are by definition unacceptable, so they must be disclosed.” …
A Treasury spokesman said: “The banks have put a number of proposals on the table. The government affirmed its desire to see a strong, responsibly and internationally competitive financial sector. The dialogue was constructive. These proposals will continue to be discussed.”
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9 Comments
Has Lord Oakeshott or anyone else come up with a suitable definition of what a “Bank” is yet? It’s a surprisingly difficult nut to crack, and I think that’s part of the political problem. Should bonus restrictions be limited to deposit takers? Or lenders? Or Investment Banks that do neither? I expect that some of the ludicrous figures being bandied about in the Press at the moment are for all organisations involved in Financial Services – which includes numerous insurance salesmen and high street mortgage brokers, as well as the “fat cats” Lord O. wants to see controlled.
These obscene banker bonuses, and the cliched ‘rewards for failure’, started life in earnest back in the 90’s. Sir Derek Wanless was one of the first undeserving recipients. The BBC reported that Wanless received a cool £3,000,000 from NatWest in 1999 following his ousting. The salient point is that Wanless was removed from NatWest because of his costly,flawed and failed strategy – the weakened NatWest subsequently fell to a hostile bid from Fred Goodwin at RBS. £3,000,000 for bringing the once mighty NatWest to its knees !
http://news.bbc.co.uk/1/hi/business/1679718.stm
That was 1999. Now in 2011 we still read that The Treasury ‘are continuing to discuss proposals’ on bonus awards. Shall we just accept that it will never happen ? Politicians are expert on obfuscation, rhetorical circumvention and filibustering. It is usually referred to as kicking an issue into the long grass. 10 years from now, and we will still be reading about fairness and unacceptable rewards.
No, you can bet your reduced disposable income that the bankers will never be made to suffer, unless that is you are a FTSE 100 director, who last year saw average pay rise by a staggering 55%.
’twas always thus – just like the Sun setting in the West.
John fuse 100 directors pay did not go up by 55%. Because share prices rose shares they had been granted in earlier years were worth more
For Chrissakes! It’s not the bonuses that are the issue, it’s the massive monopoly privileges that banks are granted by government – free, gratis – that generate the vast unearned profits from which the bonuses are paid.
Once again we have ministers focusing on the superficial EFFECTS of our dysfunctional monetary system, rather that the underlying CAUSE.
Oh for a Lib Dem politician with the balls to address the real problem and deal with the banks properly.
I have linked and reproduced the article below.
The fact is, whether the figure is 55% or 25%, whether it is incorporated in basic salary or paid in bonus, whether it is paid in readily exercisable shares or benefit-in-kind, it is outrageous profligacy, and we should not detract from the message that it cannot continue. We read daily about the level of inequality and unfairness in society. FTSE directors being paid 200 times the average worker must be addressed, and addressed now. The fraudulent misuse of MP’s expenses was know about in Thatcher’s time – nothing was done, and it was allowed to brew with disastrous consequences. This fat cat culture must not be seen to continue, when the average family face an austere decade ahead – it simply must not.
http://www.guardian.co.uk/business/2010/oct/28/uk-boardroo-pay-soars
UK boardroom pay leaps 55% in a year’Don’t they know that this is meant to be austerity Britain?’ said TUC general secretary Brendan Barber
Boardroom pay has leapt 55%.
Britain’s bosses have been accused of greed and ignoring economic reality after boardroom pay leapt by 55% over the last year.
FTSE 100 directors saw their total earnings soar in the 12 months to June, thanks to sharp rises in bonuses and performance-related pay. The average FTSE 100 chief executive now earns £4.9m a year, or almost 200 times the average wage.
Unions reacted angrily to the report today. “Don’t they know that this is meant to be austerity Britain?” said TUC general secretary Brendan Barber.
“These mega-pay rises blow away any claim that we are all in this together. While the poor and those on middle incomes lose out from cuts and pay squeezes, top directors continue to take home telephone number salaries without being overly troubled by tax,” Barber added.
He called on shareholders and the government to get a tighter grip on executive pay, at a time when ordinary workers have seen their pay kept in check by the economic downturn.
The report was welcomed by business secretary Vince Cable, who announced a review of corporate behaviour and pay earlier this week. He said it was time for executive pay to “come back down to earth”.
“We have to question whether it is linked closely enough to company performance. I’m determined to take a really close look at these important issues and want to see a wide response from industry to my review,” Cable said.
Incomes Data Services, who conducted the research, said bonuses paid to directors of FTSE 100 companies increased by 34%, while basic pay rose by 3.6%. The amount of money waiting to be disgorged from long-term incentive schemes soared by 73%, to a total of £259m, and share option gains leapt by 90%.
The FTSE 100 rose by less than a fifth over the same period.
Steve Tatton of IDS said the report suggested that companies returned to “business as usual” once the recession ended.
“It seems the days of earnings restraint were short-lived. It is as though the recession never happened,” Tatton warned.
“This time last year a number of companies actually reduced their bonus ceilings. Twelve months later it appears as if these measures have been reversed, with around 40 companies reporting higher bonus scheme maxima,” he added.
Bart Becht, who runs consumer goods giant Reckitt Benckiser, was the most highly paid FTSE 100 chief executive. He made £90m last year. IDS also calculated that Tony Pidgley of Berkeley Group enjoyed total earnings of £38.4m, followed by Mick Davis of Xstrata with £26.9m. All three benefited from share options granted in previous years. Paul Kenny, general secretary of the GMB union, said “boardroom greed is alive and well”, adding that several FTSE CEOs have come out in support of the coalition government’s deficit-reduction plans.
“Let us not forget that these are the same people urging the Government to make deep cuts in jobs and services and in the welfare on which the poorest in our society rely,” Kenny said.
In calculating total earnings IDS includes a range of payments and benefits, including the notional and actual value of share option gains, and the total cash value of long-term incentive plans.
A year ago, IDS’s report found that total earnings among FTSE 100 CEOs fell by 1.5% between June 2008 and 2009, in the teeth of the recession. However, a 7.4% rise in basic pay cushioned bosses from the impact of the downturn.
Several of Britain’s biggest companies faced shareholder anger this year over their executive pay awards. Tesco suffered one of the biggest revolts in years when nearly half its investors failed to back its remuneration policy.
Marks & Spencer was criticised for giving its new chief executive a £15m deal, while J Sainsbury had to defend a 60% rise in CEO Justin King’s total earnings, which jumped to £8m.
@John – the article in fact repeats my point. share price went up so the money directors made from share granst in previous years went up. Yoy can expect more of this given that the FSA says 80% of large bonuses in financial services be paid in shares.
Tye good news is that if the avergae director is getting £4.9m the government is getting about £3.1m in tax and NI.
Bonuses are an important issue amongst others because they incentivise traders to make short term profits at the expense of long term sustainability. This was an aggravating factor in the banking crises to begin with.
That has to stop, but the issue of restructuring the banks is even more important.
John, the issue here is the banks specifically, not the FTSE 100 in general. If M&S, Tesco or Sainsbury’s went bust the government would let them. If Barclays went bust, they would bail them out.
By the way, why was the guarantee on personal savings with a bank increased from £50,000 to £85,000 this week?
Simon – I can follow your reasoning, although I am not in agreement.
You say : ‘The good news is that if the average director is getting £4.9m the government is getting about £3.1m in tax and NI’.
OK Simon, so should I be lobbying for bankers and FTSE directors to receive an average of say £10,000,000 pa, or about 400 times the ‘mean’ wage, to provide even more for the Exchequer’s coffer ? Your logic would say -Yes ?
My point is, whether it is Government or FTSE Boards – they need to be cognisant of the public perception, at least during a period of austerity brought upon us by the egregious judgment of bankers.
A sage philosopher once said – ‘Perception is the true reality’, hence, if the public perceive salary and bonus payments to be outrageous and divisive, then the factual reality of any opposing argument is irrelevant. The placebo effect works with medication, and it works with faith. For the sake of this argument, if someone believes in an amorphous creator, then the fact that IT is no more real than the tooth fairy or Santa Claus is quite irrelevant.
My laboured point is that the importance of an individual’s perception is all that matters. If the public, as they do, perceive the bankers and FTSE directors to be a bunch of rapacious and avaricious, self interested fat-cats, then that perception, whether it is correct or not, needs to be changed.
To change that perception,will require more than knowing that the Government is getting a share of their bunco !