What about the pay consultants?
Much has been written these past few days on the size of bank bonuses. The big complaint, understandably, is that in the loss-making banks these can be perceived as rewards for failure.
Most of the criticism on bonus policy is being directed at the banks. These policies, however, are drawn up not by the banks but by their pay consultants who have been keeping their heads down in the past few weeks.
I would welcome some justification for some of these policies from those who advise their corporate clients on incentive pay. But I don't expect to see it.
The relationship between work and pay is complex. Pay does matter but it matters most at the point of negotiation and when there is a perception of injustice. Pay is used as a lure to recruit people but once they are on board it is unlikely to become a source of unrest unless they perceive they are being unfairly treated (something I explored in this column).
In the most senior ranks companies have lived with the reality that sometimes they will be paying for failure for too long.
I have yet to see a convincing argument to support the proliferation of the bonus culture in banks. As for guaranteeing bonuses, that is a nonsense as the only justification for the bonus is that it can be regarded as variable pay, offering some protection for the paying institution if markets take a tumble.
Of course, if employees have done all that is expected of them and more - which is the case for thousands of hard working people in the Royal Bank of Scotland and HBOS - it is natural that many will feel aggrieved to be losing their bonuses as a result of poor decisions at the top of the organisation.
On the other hand they may reflect that their projected bonuses derived from unrealistically high expectations over many years when times appeared good (but in fact, better than reality in a bubble economy). Those that retain their jobs must know they need to take the rough with the smooth.
A bonus must be just that - a sum of money that is not guaranteed and which should not be taken in to account in financial planning. The danger is that some people will have included expected bonuses when stretching their finances to meet a demanding mortgage, for example. They will suffer. But perhaps they should. Overspending on "hope money" is a harsh lesson for anyone, but one that should ensure greater prudence in future. Everyone must learn to live well within their means. That way they should live well.
Most of the criticism on bonus policy is being directed at the banks. These policies, however, are drawn up not by the banks but by their pay consultants who have been keeping their heads down in the past few weeks.
I would welcome some justification for some of these policies from those who advise their corporate clients on incentive pay. But I don't expect to see it.
The relationship between work and pay is complex. Pay does matter but it matters most at the point of negotiation and when there is a perception of injustice. Pay is used as a lure to recruit people but once they are on board it is unlikely to become a source of unrest unless they perceive they are being unfairly treated (something I explored in this column).
In the most senior ranks companies have lived with the reality that sometimes they will be paying for failure for too long.
I have yet to see a convincing argument to support the proliferation of the bonus culture in banks. As for guaranteeing bonuses, that is a nonsense as the only justification for the bonus is that it can be regarded as variable pay, offering some protection for the paying institution if markets take a tumble.
Of course, if employees have done all that is expected of them and more - which is the case for thousands of hard working people in the Royal Bank of Scotland and HBOS - it is natural that many will feel aggrieved to be losing their bonuses as a result of poor decisions at the top of the organisation.
On the other hand they may reflect that their projected bonuses derived from unrealistically high expectations over many years when times appeared good (but in fact, better than reality in a bubble economy). Those that retain their jobs must know they need to take the rough with the smooth.
A bonus must be just that - a sum of money that is not guaranteed and which should not be taken in to account in financial planning. The danger is that some people will have included expected bonuses when stretching their finances to meet a demanding mortgage, for example. They will suffer. But perhaps they should. Overspending on "hope money" is a harsh lesson for anyone, but one that should ensure greater prudence in future. Everyone must learn to live well within their means. That way they should live well.
Labels: bank bonuses, HBOS, Royal Bank of Scotland
posted by Richard Donkin at
2:58 AM
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