Time for salary cap for bankers?

February 9, 2009

It’s not a great time to be a banker at the moment with financial apocalypse making the pin-striped gents probably more loathed than estate agents or journalists. Thousands of them have lost their jobs and those that are still in paid employment are finding that their renumeration packages are coming under ever greater public scrutiny.

Over the weekend reports that the Royal Bank of Scotland was about to award its staff a billion pounds in bonuses prompted outrage at a time of soaring unemployment and with a deep recession looming. Most people would agree it is a no-brainer that a company that has just posted the biggest-ever financial loss in British corporate history, required a 20-billion-pound government bail-out to stay afloat last year and is now nearly 70-percent state-owned should not be allowing its staff to be trousering huge bonuses.

The banks say they are bound by contract to pay the bonuses and that they need to retain key staff.

But that argument has got the former deputy prime minister John Prescott so riled he has even launched a public campaign against the bonus payments on Facebook. “This is morally and economically outrageous,” wrote Prescott. “If we hadn’t bailed them out to save homeowners and businesses, their contracts would be worth nothing as they’d be out of work.”

Over in America U.S. President Barack Obama has set a $500,000 annual cap on executive pay and imposed other restrictions on companies that receive government aid. Chancellor Alistair Darling has said it is too early to follow Obama’s lead, despite the European Commission urging states to cap bank pay.

Is it time for banks that are receiving government help to be subjected to a salary cap or would that policy be counterproductive to economic revival?


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I am not a fan of John Prescott, but the man is absolutly right, it is a moral outrage to reward the Banking people for the complete disaster in the Banks that has and is giving utter grief to the people of Britain.
Mr Brown has got to stop these boses from being paid bonus’s now-no excuses!

Posted by len boden | Report as abusive

I really do not see what the problem is. Performance based bonuses are based upon performance. So, let’s take out of the calculation the money injected by HMG and the taxpayer and recalculate the worth of the bank. Oh, silly me, they would be broke. So, far from expecting/demanding a bonus they are lucky to have a job.

If HMG allows RBS or any other forced funded bank to pay bonuses based on performance, then it is time that the taxpayer demanded new representaives at the table. Starting with changing out the Prime Minister, the former Chancellor who told us for 8 years how well he was managing the economy.

Posted by Exciled Abroad | Report as abusive

Talking about “Moral outrage” – who is better placed to comment than John Prescott. I am just wondering why is not abstaining from making political comments.
Coming back to bonuses, lot of lower level staff in RBOS and HBOS don’t have high pay packets as might be the case with senior memanegment. It is worthwhile to point out that, in good times, when everybody was getting pay rises from 2% – 5%, most these people got measly increments of 0.75% – 1.5% and much was coming through bonuses. So justifying these bonus cuts for these staff is not corrent.

Posted by Puneet Khanna | Report as abusive

I am increasingly staggered by the weakness of politicians in this matter. How ludicrous that any bonuses should be considered at all. The weak comments that have been publically made by many ministers talk of “exercising sensitivity” in the matter but I feel they should be expressing outrage. As for concern about the bankers moving elsewhere – well let them do so. They have performed so extrememly badly why would we wish to keep them. Perhaps they could then be replaced with individuals who are prepared to do a good job for a very good salary and have enough moral fibre to feel that excessive personal gain and wealth is not the name of the game.

Posted by Julie Donnell | Report as abusive

Everyone seems to be whingeing about RBS bonuses but not one of you have made any comments about government approved plans to give Northern Rock employees upto 50% of their salaries over the next year or two as bonus.

Northern Rock some of you will remember was taken over by the Government, whereas RBS is still functioning as a private entity.

Another example of selective hearing from the comentators.

Posted by nick | Report as abusive

I also don’t know what the problem is. The shareholders should decide what they are happy to accept. Where the government is the majority shareholder, obviously it holds all the cards, including sacking the entire board. Next issue please (hopefully more interesting).

Posted by Matthew | Report as abusive

I am seething about bankers bonuses. If they have legal contracts then break them and let these arrogant, selfish individuals take the isssue to the courts – the legal fees should nicely eat up their greedy little nest eggs.

Posted by margaret Perchard | Report as abusive

Well remebered Nick, the goverment should cap all salaries of all the banks were tax-payers money have been handed, yes i know all the lower earners will lose out on bonus pay, but consider your self lucky you still have a job.
Many companies have resorted to not give pay increases and give bonus due to the current economic climate, so you wont be the only ones.

Posted by Margarita | Report as abusive

Time for Mr Browne and Mr Darling to grow some balls and put their feet down….follow Obama’s lead and cap the salaries and put a stop to executive bonuses period.
It still annoys me that the phrase ‘to get the best and retain the best, we have to pay these salaries’
Well the question begs, best at what??? Bringing the Banks AND the whole economy to a gringing halt??
Time these buggers paid back some of the money the’ve had in the ‘glory’ years…don’t criminals have the proceeds of crime confiscated? Same applies here.!!

Posted by Simon Sheppard | Report as abusive

No matter what country we are discussing , the fact is that there has been a lot of bad judgement by so-called professionals in the fields of finance and starting at the top of each institution , there has to be accountability and changes made . CEO’s and CFO’s were paid very large salaries because of their so-called expertise which has proven to be wrong . The blame starts there and trickles down . Any institution being bailed out by the government should have a salary cap for their top executives with no one in that organisation making more than $100,000 yearly until the funding has been repaid with interest .
Anyone in that organisation who resigns should be investigated ; far to many quit in the hope of avoiding prosection . If they screwed up , they should pay up .

Posted by Joseph Zani | Report as abusive

Bonuses are good, especially for employees of companies which are not recipients of government hand-outs. This is standard compensation for employees who drive revenues with both credit-related and non-credit related products. Banks such as HSBC and Deutsche are prime examples and should be allowed to make decisions as they see fit, without concern for public outcry. If you made millions for your company, wouldn’t you want to be compensated for it?

Posted by Abe Lincoln | Report as abusive

[…] one thing I don’t expect from Mr. Gettelfinger, though: a cap on his salary like some of those other beneficiaries of government bailouts […]

Posted by Something You Won’t See From The UAW ›› A Blog On War, News, Politics, Culture, Religion & The Navy › The Yankee Sailor › 17Feb09 | Report as abusive

I would really be interested in joining a campaign to force the government to investigate the bankers greed does anyone know of any vehicle for this ? They have all just walked away laughing carrying oodles of cash. The MPs expenses fiasco has taken over the media and, it seems, let the bankers off the hook !

Posted by Roger Burton | Report as abusive