There was considerable outrage when it was learned that bonuses were paid to the failed Wall Street bank executives. Why would anyone reward failure? Well, that’s exactly what they’re doing in Europe.Here’s more from the Telegraph:
“The Royal Bank of Scotland (RBS) is proposing to pay close to £1 billion in bonuses to its staff, just months after it was rescued by a £20 billion taxpayer bail-out, The Sunday Telegraph can reveal.
The bank’s board has begun discussions about the bonuses with UK Financial Investments (UKFI), the body set up by the Treasury to manage the Government’s shareholdings in Britain’s ailing banks.
The scale of the plan is likely to increase public anger as the recession deepens, and add to the frustration of ministers. It comes as Alistair Darling, the Chancellor, announces in The Sunday Telegraph today his plans for an independent review of the way banks are managed, including the bonus system.
The review, which ministers hope will address voters’ concerns about big payments to executives, will examine the roles of directors and institutional investors and study how British banks compare with overseas institutions.
“We cannot return to business as usual,” writes Mr Darling in this newspaper. “It is in everyone’s interest to get banks’ governance right. It would be wrong to reward people whose excessive risk-taking brought the banks down, causing misery to millions of their customers. Success should be rewarded. Failure should not.” The Chancellor will announce the detailed terms of reference of the review, and its chairman, tomorrow.
In an attempt to appease ministers, RBS has indicated that no individual banker will receive a bonus with a cash element of more than £25,000 under its plans.
The remainder of the bonuses, to be paid next month, will be in RBS shares, with a large proportion of them deferred or not paid at all if an employee leaves RBS within an agreed period, or if their area of the bank makes significant losses in the following two years.
The bank has decided it will not pay any bonuses to employees who work in loss-making areas of the business.
UKFI, which is led by John Kingman, a senior Treasury official, is considering the proposals.
About half of the bank’s “bonus pool” will consist of payments that RBS believes it is contractually obliged to pay. Much of this sum will be paid to employees of ABN Amro, the Dutch banking group for which RBS is now acknowledged to have overpaid at the height of the banking boom. The proposed remaining bonus pool, worth about £500 million, is discretionary.
Although the sum of nearly £1 billion will provoke outrage, it represents a fall of about 60 per cent on the previous year’s bonus payments. The cash component is understood to be about 80 per cent down on last year.
RBS, which has a new chairman and chief executive in place of their sacked predecessors, is sensitive to accusations that it is paying “rewards for failure”. Stephen Hester, the new boss, will give evidence to the Commons Treasury select committee on Wednesday, when he is likely to be questioned about the bonuses. His predecessor, Sir Fred Goodwin, will appear on Tuesday.
A statement issued by UKFI last week said that “as a majority shareholder in RBS, [UKFI] is in discussions on possible approaches to remuneration. No decisions have yet been taken.”
The row over bonuses will also affect employees at Lloyds, in which the taxpayer owns a 43pc stake, and Barclays. Lloyds’ executive directors are understood to be planning to retain their share-based bonuses for last year.” (End of Excerpt) Read the rest here.
While the bailed out bank execs received their bonuses, let’s take a look at how the rest of us are dealing with the credit crunch.This documentary,”In Debt We Trust_America Before The Bubble Bursts” talks about how the banks survive off the debt that Americans continue to incur. Basically,how the fat cats on Wall Street got that way.Now that it’s so hard to get credit,it would be a great time to reflect on our “culture of consumption“.How much debt are you in?If you are up to your neck in it,you’re not alone.That’s what this whole documentary is about.More Americans than ever are living in a “modern serfdom“.
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