Bonus's

Wallace1492

Yes, we have seen all thechat about Hester. Here is my tuppence though.

I have seen the Bonus culture rise in the last 10 years or so. Was a time that (we in the Banking sector) got Profit Sharing. Now, this was good. If the bank made money, then we all got to share in the profits, if it didn't, then we got nowt. This then changes to Bonus, and it all became very arbitrury. There was no set percentage, and you absolutely could not talk about what you got with any other employee, therefore it all became secret and probably unfair. If you were mates with Boss who set Bonus, then happy days.

It is not the rewarding of 1 individual at the top that is the issue to me, but to the thousands/tens of thousands who still got Bonus's when the banks were losing billions. And they continue to get them.

The whole sector really annoys me now, and maybe I should have done something else sooner. Ah well, 3 weeks to go!

daviesee

I have been working for over 30 years.
I have never recieved a bonus.

Performance related (directly +10% = +10%) is fair enough but the current state of affairs really pi$$es me off.

Surely a bonus cap of 50% salary wouldn't be too hard to implement?

Anyone achieving +50% year on year deserves it. Anyone achieving +100% is probably taking risks and/or slashing staff.

notsoblue

To be fair, the situation has only developed this way because we (through our elected representatives) let them. They aren't above the law, if there was huge public support for more regulation on matters such as this then it would have been implemented already. Unless somehow the financial industry has more political influence than the general population, or something crazy like that. Right?

rick_chasey

daviesee wrote:

I have been working for over 30 years.
I have never recieved a bonus.

Performance related (directly +10% = +10%) is fair enough but the current state of affairs really pi$$es me off.

Surely a bonus cap of 50% salary wouldn't be too hard to implement?

Anyone achieving +50% year on year deserves it. Anyone achieving +100% is probably taking risks and/or slashing staff.

What if you're in a sales environment? It would make sense that you get given a small salary and are expected to make up the majority of your pay on a commission basis. That way, if you're rubbish, the company isn't out of pocket. If you are, you get rewarded.

In investment banks works the same, albeit bonuses are largely discretionary.

It's done like this because there are factors beyond hard P&L (whether it's where the accountants decide where the money is counted or whether your addition to the firm is not discreetly measurable), and to allow banks to make decisions re business critical or not people.

Banks are supposed to use bonuses as a form of 'performance related pay'. I.e. your salary is low but if you make a lot of money, we'll pay you. If not, you won't get anything.

In practice of course, it hasn't quite worked like that, but in principle, performance related pay makes sense in some industries.

notsoblue

btw, shouldn't it be "Bonuses" ?

/pedant

suzyb

Why shouldn't those that are smart and and/or lucky and/or business savy enough to get themselves into a position of boss of a major company not be rewarded for that.

Wallace1492

Performance Related Pay makes plenty sense, however its how it is implemented that proves if it worked,

Example - last year my boss told me what performance grade a member of my team was to be. He barely knew them, or what they did, or how they had performed. He simply needed numbers. Now this ranking would affect their bonus, and I told him I simply would not accept it. He had to cave in as he had nothing to back it up. It just shows how out of touch some can be.

rolf_f

Rick Chasey wrote:

What if you're in a sales environment? It would make sense that you get given a small salary and are expected to make up the majority of your pay on a commission basis. That way, if you're rubbish, the company isn't out of pocket. If you are, you get rewarded.

That assumes that if you are rubbish, you don't make sales. The problem here is that it seems entirely unclear as to whether the personal contribution of those receiving the bonuses really does make a difference. If you are selling to an undiscerning customer base who need no convincing to buy, then your personal contribution actually makes no difference.

suzyb wrote:

Why shouldn't those that are smart and and/or lucky and/or business savy enough to get themselves into a position of boss of a major company not be rewarded for that.

Indeed - the poor RBS chap is now going to have to get by on his million pound salary pittance. No new helicopter for him this year.

Wallace1492

notsoblue wrote:

btw, shouldn't it be "Bonuses" ?

/pedant

Yes. Quite

suzyb wrote:

Why shouldn't those that are smart and and/or lucky and/or business savy enough to get themselves into a position of boss of a major company not be rewarded for that.

Have no complaints about that. It is the culture that people expect a bonus even when things have gone bad for the company. OK, its not everyone's fault, but hey-ho. Boss getting £1M bonus costs £1M, next 20,000 getting £20k each costs £400,000,000.

rick_chasey

Rolf F wrote:

Rick Chasey wrote:

What if you're in a sales environment? It would make sense that you get given a small salary and are expected to make up the majority of your pay on a commission basis. That way, if you're rubbish, the company isn't out of pocket. If you are, you get rewarded.

That assumes that if you are rubbish, you don't make sales. The problem here is that it seems entirely unclear as to whether the personal contribution of those receiving the bonuses really does make a difference. If you are selling to an undiscerning customer base who need no convincing to buy, then your personal contribution actually makes no difference.

That's up to the business to decide right?

They may say we will only count a third of repeat customer sales re your comp or whatever.

The point is, flexible pay, when it is actually flexible, makes a lot of sense.

SteppenHerring

Rick Chasey wrote:

Rolf F wrote:

Rick Chasey wrote:

What if you're in a sales environment? It would make sense that you get given a small salary and are expected to make up the majority of your pay on a commission basis. That way, if you're rubbish, the company isn't out of pocket. If you are, you get rewarded.

That assumes that if you are rubbish, you don't make sales. The problem here is that it seems entirely unclear as to whether the personal contribution of those receiving the bonuses really does make a difference. If you are selling to an undiscerning customer base who need no convincing to buy, then your personal contribution actually makes no difference.

That's up to the business to decide right?

They may say we will only count a third of repeat customer sales re your comp or whatever.

The point is, flexible pay, when it is actually flexible, makes a lot of sense.

The problem with "incentivising" people to make sales is that they end up mis-selling.

Wrath Rob

Here it breaks down to 4 tiers. Tier 4 (bottom) get zero bonus and this is a clear message that your performance is not satisfactory and you either need to get your act together fast or leave. Tier 3 is "adequate", i.e. you're doing your job to a reasonable level but there's plenty of scope for improvement, you'll get a bonus but it won't be great. Tier 2 is strong performers doing a good job, bonus will be in line with expectations (whatever they've been set at). Tier 1 is top performers, promotion candidates and you will get a good bonus. A lot of effort goes into the ranking into tiers and there has to be evidence to back it up (although I'm sure some of this is after-the-fact). In other words, hit all of your objectives and more and you'll be tier 1. Be a lazy ass and you're tier 4. It is a meritocracy and does relate directly to your performance.

However, the actual monetary values depend on how the bank has performed, so in a bad year a "good" bonus will be much worse than when the bank has had a good year.

So, does Hester deserve his bonus? It depends on what his objectives were. If it was to cut costs in the organisation and de-risk the bank as part of a 3-5 year strategy to turn the bank around and position it for growth once the crisis subsides, then he probably does. If it was to improve the share price then maybe not, RBS are underperforming against the sector, e.g. being down 36% on the YTD vs. about 22% for Barclays although the euro-zone and general economic woes won't have helped.

rolf_f

Rick Chasey wrote:

That's up to the business to decide right? .

Yes - if they choose to do so. In the case of these big boss bonuses though, the decision is not based on 'sales' but on the basis that 'if we agree to give him a big bonus, then I'll probably get a big bonus too'.

These people often don't hang around long enough to really have any need to regard the long term health of their organisation to be their top priority; they are in it to get as much out of the company in as short a time as possible. It's one reason why Germany is economically far stronger than we are; individuals there tend to be in it for the long term. Their pride is based on the long term success of their company and not the size of their pay packet.

meanredspider

The trouble will all of this is that it's very very difficult to get right. I've seen cultures where people do the wrong thing for the business but it will improve their particular metrics & therefore improve their pay/bonus. My dad, who used to work for Lloyds Bank 40 years man & boy, said this often happened. I believe some very "forward thinking" organisations (WL Gore may be one) have your peers determine what you are contributing and therefore what you are worth. Personally, unless reward is related to something broader than individual results, then it's open to abuse.

sfichele

Rick Chasey wrote:

What if you're in a sales environment? It would make sense that you get given a small salary and are expected to make up the majority of your pay on a commission basis. That way, if you're rubbish, the company isn't out of pocket. If you are, you get rewarded.

But didn't that sort of culture lead to bad practices such as indiscriminately selling bad mortgages to people who couldn't afford them - i.e. one of the major causes of the credit crunch originating from US.

W1

Rolf F wrote:

Rick Chasey wrote:

That's up to the business to decide right? .

Yes - if they choose to do so. In the case of these big boss bonuses though, the decision is not based on 'sales' but on the basis that 'if we agree to give him a big bonus, then I'll probably get a big bonus too'.

These people often don't hang around long enough to really have any need to regard the long term health of their organisation to be their top priority; they are in it to get as much out of the company in as short a time as possible. It's one reason why Germany is economically far stronger than we are; individuals there tend to be in it for the long term. Their pride is based on the long term success of their company and not the size of their pay packet.

Erm, if they get paid in shares (as many banking bonuses are), they have a very real incentive to maintain the long term health of the business.

rick_chasey

For sure, selling needs to be regulated.

But the pay structure in your instance isn't at fault. If we have a free-market model, we should expect people to be greedy and regulate accordingly.

rick_chasey

W1 wrote:

Rolf F wrote:

Rick Chasey wrote:

That's up to the business to decide right? .

Yes - if they choose to do so. In the case of these big boss bonuses though, the decision is not based on 'sales' but on the basis that 'if we agree to give him a big bonus, then I'll probably get a big bonus too'.

These people often don't hang around long enough to really have any need to regard the long term health of their organisation to be their top priority; they are in it to get as much out of the company in as short a time as possible. It's one reason why Germany is economically far stronger than we are; individuals there tend to be in it for the long term. Their pride is based on the long term success of their company and not the size of their pay packet.

Erm, if they get paid in shares (as many banking bonuses are), they have a very real incentive to maintain the long term health of the business.

I'd suggest, as I have elsewhere, that is very much dependent on how big the company is and how big a) your impact is on the company and b) how many shares you have.

Guys at the bigger IBs, say Goldman, getting £1m shares in their own bank aren't going to affect their own share price, unless they go rogue.

gtvlusso

My bonus is company performance related (as opposed to personal performance related). However, I have received bonus' but never outrageous sums and they have been intermitant over my career - part of my remuneration package and I work damned hard for it.

My view on Hester:

I think the whole thing here stinks.

Someone interviewed Mr Hester for the job and part of his agreed contract was this remuneration package (bonus related). So, I blame whoever agreed to the package in the first place for the role, considering it is a 'state owned' bank MP's and the state would have had a say - but who exactly?!

However, this raises another issue - The poison chalice, without the financial remuneration of this role, would anyone compitent to do the role be enticed to take the role without the package? And now that a furore has kicked up in the media and allot of fairly over paid MP's have jumped on the gravy train (who must have agreed to the remuneration package in principle as the primary shareholder is the public represented by their MP's - hide their own f*ckwittery) - Will Mr Hester quit?

Now that Mr Hester has waived his remuneration, if he quits the post - who the f*ck is gonna take the job on (who is competent) if their salary and perks are going to be reviewed and laid bare to the world and scrutinised in this manner?

I think we have been screwed and I feel quite sorry for Mr Hester.

W1

gtvlusso wrote:

My bonus is company performance related (as opposed to personal performance related). However, I have received bonus' but never outrageous sums and they have been intermitant over my career - part of my remuneration package and I work damned hard for it.

My view on Hester:

I think the whole thing here stinks.

Someone interviewed Mr Hester for the job and part of his agreed contract was this remuneration package (bonus related). So, I blame whoever agreed to the package in the first place for the role, considering it is a 'state owned' bank MP's and the state would have had a say - but who exactly?!

However, this raises another issue - The poison chalice, without the financial remuneration of this role, would anyone compitent to do the role be enticed to take the role without the package? And now that a furore has kicked up in the media and allot of fairly over paid MP's have jumped on the gravy train (who must have agreed to the remuneration package in principle as the primary shareholder is the public represented by their MP's - hide their own f*ckwittery) - Will Mr Hester quit?

Now that Mr Hester has waived his remuneration, if he quits the post - who the f*ck is gonna take the job on (who is competent) if their salary and perks are going to be reviewed and laid bare to the world and scrutinised in this manner?

I think we have been screwed and I feel quite sorry for Mr Hester.

Don't worry, on the other thread it's been decided that anyone can do the job and therefore we need pay them no more than 20 Malboro lights and some cans of Carling, and minimum wage.

It will be fine.

gtvlusso

W1 wrote:

gtvlusso wrote:

My bonus is company performance related (as opposed to personal performance related). However, I have received bonus' but never outrageous sums and they have been intermitant over my career - part of my remuneration package and I work damned hard for it.

My view on Hester:

I think the whole thing here stinks.

Someone interviewed Mr Hester for the job and part of his agreed contract was this remuneration package (bonus related). So, I blame whoever agreed to the package in the first place for the role, considering it is a 'state owned' bank MP's and the state would have had a say - but who exactly?!

However, this raises another issue - The poison chalice, without the financial remuneration of this role, would anyone compitent to do the role be enticed to take the role without the package? And now that a furore has kicked up in the media and allot of fairly over paid MP's have jumped on the gravy train (who must have agreed to the remuneration package in principle as the primary shareholder is the public represented by their MP's - hide their own f*ckwittery) - Will Mr Hester quit?

Now that Mr Hester has waived his remuneration, if he quits the post - who the f*ck is gonna take the job on (who is competent) if their salary and perks are going to be reviewed and laid bare to the world and scrutinised in this manner?

I think we have been screwed and I feel quite sorry for Mr Hester.

Don't worry, on the other thread it's been decided that anyone can do the job and therefore we need pay them no more than 20 Malboro lights and some cans of Carling, and minimum wage.

It will be fine.

Ah sh1te - I would have done it for £20 and a pickled egg......but Marlboro's damn luxury item these days.....

SimonAH

meanredspider wrote:

The trouble will all of this is that it's very very difficult to get right. I've seen cultures where people do the wrong thing for the business but it will improve their particular metrics & therefore improve their pay/bonus. My dad, who used to work for Lloyds Bank 40 years man & boy, said this often happened. I believe some very "forward thinking" organisations (WL Gore may be one) have your peers determine what you are contributing and therefore what you are worth. Personally, unless reward is related to something broader than individual results, then it's open to abuse.

This.

My company works on a salary plus bonus footing and in itself I think this is a very good thing in that the bonuses are linked to both personal and corporate performance.

However the problem is in the set goals. For example we have introduced a CRM system recently and 'full use' of this system is in just about everyone's goals. Net result? Savvy employees are wasting time and effort typing reams of meaningless carp into the CRM system to demonstrate lots of activity - without actually doing any useful activity. One of my colleagues admitted that he spent an entire day randomly changing tiny details in his company contacts so that it would show lots of activity updating core data....madness.

I can't remember who said it but "measure me irrationally then expect me to behave irrationally to meet your measures" or something along those lines...

W1

gtvlusso wrote:

W1 wrote:

gtvlusso wrote:

My bonus is company performance related (as opposed to personal performance related). However, I have received bonus' but never outrageous sums and they have been intermitant over my career - part of my remuneration package and I work damned hard for it.

My view on Hester:

I think the whole thing here stinks.

Someone interviewed Mr Hester for the job and part of his agreed contract was this remuneration package (bonus related). So, I blame whoever agreed to the package in the first place for the role, considering it is a 'state owned' bank MP's and the state would have had a say - but who exactly?!

However, this raises another issue - The poison chalice, without the financial remuneration of this role, would anyone compitent to do the role be enticed to take the role without the package? And now that a furore has kicked up in the media and allot of fairly over paid MP's have jumped on the gravy train (who must have agreed to the remuneration package in principle as the primary shareholder is the public represented by their MP's - hide their own f*ckwittery) - Will Mr Hester quit?

Now that Mr Hester has waived his remuneration, if he quits the post - who the f*ck is gonna take the job on (who is competent) if their salary and perks are going to be reviewed and laid bare to the world and scrutinised in this manner?

I think we have been screwed and I feel quite sorry for Mr Hester.

Don't worry, on the other thread it's been decided that anyone can do the job and therefore we need pay them no more than 20 Malboro lights and some cans of Carling, and minimum wage.

It will be fine.

Ah sh1te - I would have done it for £20 and a pickled egg......but Marlboro's damn luxury item these days.....

You can be leader of the Opposition.

daviesee

Rick Chasey wrote:

What if you're in a sales environment? It would make sense that you get given a small salary and are expected to make up the majority of your pay on a commission basis. That way, if you're rubbish, the company isn't out of pocket. If you are, you get rewarded.

My answer to that is that the wages should be higher to attract better sales people.

If the boss hires rubbish people that's his fault.

I know that the way you describe things is how it works but that does not mean that it is the way that it should work.

rick_chasey

daviesee wrote:

Rick Chasey wrote:

What if you're in a sales environment? It would make sense that you get given a small salary and are expected to make up the majority of your pay on a commission basis. That way, if you're rubbish, the company isn't out of pocket. If you are, you get rewarded.

My answer to that is that the wages should be higher to attract better sales people.

If the boss hires rubbish people that's his fault.

I know that the way you describe things is how it works but that does not mean that it is the way that it should work.

Keeps my company afloat...

W1

daviesee wrote:

Rick Chasey wrote:

What if you're in a sales environment? It would make sense that you get given a small salary and are expected to make up the majority of your pay on a commission basis. That way, if you're rubbish, the company isn't out of pocket. If you are, you get rewarded.

My answer to that is that the wages should be higher to attract better sales people.

If the boss hires rubbish people that's his fault.

I know that the way you describe things is how it works but that does not mean that it is the way that it should work.

The problem with that is that you have very high fixed costs in the lean times, which are much more difficult to swallow, and it's expensive to get rid of people.

Rick will confirm either way, but I understand that bank salaries are now higher, due to the criticism of the "bonus culture". All that that means is that banks have higher costs, and bankers have less incentives - overall, that may lead to lower profits accross the board, and a higher risk of future default (perhaps).

rick_chasey

W1 wrote:

daviesee wrote:

Rick Chasey wrote:

What if you're in a sales environment? It would make sense that you get given a small salary and are expected to make up the majority of your pay on a commission basis. That way, if you're rubbish, the company isn't out of pocket. If you are, you get rewarded.

My answer to that is that the wages should be higher to attract better sales people.

If the boss hires rubbish people that's his fault.

I know that the way you describe things is how it works but that does not mean that it is the way that it should work.

The problem with that is that you have very high fixed costs in the lean times, which are much more difficult to swallow, and it's expensive to get rid of people.

Rick will confirm either way, but I understand that bank salaries are now higher, due to the criticism of the "bonus culture". All that that means is that banks have higher costs, and bankers have less incentives - overall, that may lead to lower profits accross the board, and a higher risk of future default (perhaps).

I personally can't see the higher salaries continuing in banking.

But W1 - weren't the bonuses post crash indicative that the pay never really provided a proper incentive anyway, in that regardless of performance, they were still paid?

If you have performance related pay, it should, quite literally, be related to performance, both ways.

That's why guaranteed bonuses were banned.

UndercoverElephant

Other people's bonuses are always disgusting and undeserved.

dodgerdog

There is a fundamental flaw in the perpetuated argument as to paying the market rate in a global cometitive market to retain the talent. In principle this works but has been converted in a race to the top that ensures that it is the basis for a salary/bonus escalator rather than being an index basing against the sector average to determine whether:

a) the business is performing well or lagging the sector
b) whether the managament team of the business are doing well versus their peers and hence merit remuneration comparable to the sector.

I work in a often under-valued (financially) organisation whoch retains huge popular support and have never recieved a bonus financial or otherwise and hence find the bonus culture bizarre in the sense of entitlement that has emerged.

Corproate remuneration committees need to reassess what the bonus is for and rather than succumbing to the hypoe that folks will walk if they do not recieve a bonus of X as it is disrespectful to them for their toils. I would hazard a guess that those nost vociferous are the borderline individuals who have come to see themselves and their corporate worth in an inflated sense and would in real terms be a very marginal loss to the company employing them if their bluff was called.

rolf_f

meanredspider wrote:

The trouble will all of this is that it's very very difficult to get right. I've seen cultures where people do the wrong thing for the business but it will improve their particular metrics & therefore improve their pay/bonus.

What we get all the time are re-organisations and projects. Someone gets something nice to hang their performance rating on, completes to time and budget (which are the only measures of success), gets a good rating, gets a new, higher paid job and it's only later, under someone elses charge, that it becomes apparent what a tits up/waste of taxpayers money/pointless exercise it was. And then the whole thing repeats.

Repeat a few times and of course the project manager ends up running the company, despite never having achieved anything that has actually helped the organisation, and is adored by W1

notsoblue

Rolf F wrote:

meanredspider wrote:

The trouble will all of this is that it's very very difficult to get right. I've seen cultures where people do the wrong thing for the business but it will improve their particular metrics & therefore improve their pay/bonus.

What we get all the time are re-organisations and projects. Someone gets something nice to hang their performance rating on, completes to time and budget (which are the only measures of success), gets a good rating, gets a new, higher paid job and it's only later, under someone elses charge, that it becomes apparent what a tits up/waste of taxpayers money/pointless exercise it was. And then the whole thing repeats.

Repeat a few times and of course the project manager ends up running the company, despite never having achieved anything that has actually helped the organisation, and is adored by W1

Never achieved anything that has helped the organisation? Have you ever worked in a significantly large team that completed a complex project on time and on budget *without* a project manager/project lead? Someone has to herd the cats