The Banker Bonus Dilemma

Hasn't there been some press lately regarding the bonus payouts at Banks over the last few months!

I have to say, I can understand why the public is concerned at seeing institutions that received taxpayer support to survive, then go on to spend millions on "bonus" payments to their employees. However, we need to look at this situation in context.

Firstly, the disclaimer. Yes, I work at an Investment Bank which was a recipient of some TARP money. BUT, since I am a consultant, I am not a participant in the whole Bonus game, so I have no personal interest in seeing bonuses paid or not paid.

So, back to the bonus dilemma. The politicians have really dived headfirst into this. Barack has spoken about it and Gordon Brown is talking about this as well. Ever since these goverments took equity stakes in these institutions they have used it as a political tool to gain public support.

The REAL issue though is that the salary structure is weighted so much towards incentive payments, or "bonuses", that without them bankers are on fairly average salaries. I know, I wouldn't be hanging around, busting my arse off for 60 hours a week if I didnt get a bonus at the end of the year. So just at a time when we need good people to work hard and turn things around, we are left with a disenchanted workforce who are putting in less. Bit of a problem, hey?

So, fine you say, cut bonuses and bump up base salaries. But, isnt that a zero sum gain?

If you have high bases and a smaller bonus element, then you'll have a bunch of freeloaders floating around. Might even end up a bit like a government department with bureaucrats making work for themselves and achieving nothing...?

And what about the contractual bonuses that are written into the contracts of these high flying bankers? That is - the ones who actually generate money for the firm? There is no dodging these bonus payments. They're contractually bound and if not paid, a solid source of income generation for the firm would disappear.

After all this political crap, no wonder firms like GS want to pay the damned TARP money back. There are solid institutions out there, that took the money at the suggestion of the government, to give the policy some support when it was launched. Now they find themselves with a major shareholder that will change their mind on a whim if it means an extra vote or two...

So, tough situation hey, but geez Im sick of hearing these fat cat politicains talk about bonuses... How many stories are there of self serving pension arrangements and pay raises within politics? Funny how we havent heard much about that lately