My story with Dave, the kids, Cooper, VW's & rugby

Bankers Bonuses – Are They Right?

There has been much debate today as to whether the bankers (boo hiss) deserve their extraordinary levels of bonus payouts. The bank in question today is RBS which reported a loss for 2009 of £3.6 billion which is a pretty staggering amount, but not as much as the £24 billion it lost in 2008.

The bonus payouts at RBS, which is 84% owned by the UK taxpayers after they got bailed out in the banking crisis, total £1.3 billion. It is a huge amount of money and the debate goes on whether the bankers should be getting any bonuses at all when they have such massive debts and when they are still making a loss. In the “real” business world you get a bonus if, a) you have a really kind boss 🙂 or b) the company has made good profits the previous year. But to pay out bonuses which are only going to increase the debt and reduce the profits of a company seems a bit crazy.

Most of the bonuses won’t be in real cash but mainly in shares in RBS… but are there really any shares left to hand out if the UK government have 84% of the control, or are these shares just magically appearing to devalue the existing shares that have been allocated. It seems a bit of a false economy.

But RBS is just like any other business… if the staff are not happy or they feel that they are not been valued with their level of salary or bonus payouts they will leave, and potentially the company may suffer from losing experience and loyalty. The chief executive of RBS, Stephen Hester, reckons that RBS would have made another £1 billion if they had retained the staff that they lost last year. Obviously the bankers that are still there have managed to turn a big part of the company around by reducing the losses by over £20 billion which is a pretty good achievement.

Many taxpayers just think it is unfair, I presume because the bonus payouts are more than they will earn in their whole lifetime but it is all relative. If you are making the company you work for millions of pounds this needs to be rewarded with a sizeable bonus. The whole of the banking crisis doesn’t rest with all of the bankers. There will have been a division of RBS that went and took on the toxic debts, some of which were disguised, as they believed that they would be able to profit from them. Banking is just a big gamble and you win some, you lose some.

George Osbourne the shadow chancellor, who just annoys me, was on the Breakfast news this morning saying that the bankers pay needs reviewing as it is unacceptable. But what does he propose to do, bring in a pay cap? Does a government have a right to say what a company can pay employees? If the government did decide to dabble in the pay structure in banks that it has a controlling share in the bankers would just leave, go abroad and make other banks stronger and end up leaving behind a failing bank unable to repay its debts. Would the Conservatives then think that they can question say what a footballer gets .. I mean are footballers really worth £100,000 a week?