Reading reports in the Times that RBS is set to pay out tens of millions of pounds in bonuses to thousands of its “star” traders, it’s hard not to buy into the deep feelings of public resentment.
After all, British taxpayers have bailed the bank out to the tune of £20billion, and it is widely predicted to announce £multi-billion losses in just a few weeks’ time.
Whilst it’s easy to jump on the bandwagon and decry any kind of payout, is it too simplistic to form judgements on the basis of these headline numbers?
For example, those numbers mask massive variations in performance across various parts of the business. Parts of its GBM investment banking arm actually generated significant profits, and it is presumably they who stand to pocket most of the payments.
Then there’s the argument that, if bonuses are withheld, we may end up creating a vicious cycle of decline – causing top talent to defect, making it harder to attract up-and-coming stars to replace them, and ultimately damaging the long-term interests of the taxpayer.
Personally, I don’t buy either argument. I’ve certainly never enjoyed a bonus scheme that wasn’t triggered by overall company results, so it’s hard for me to see the rationale for big bonus payments, however well individuals or divisions may have performed. As for the second line of argument, where exactly are these people supposed to defect too?!
No, to my mind, the criticism of planned payouts is entirely justified – and for one very simple reason. There wouldn’t be a bank, let alone a pot to pay bonuses, were it not for the grace of public money. Frankly, these people should be thankful they still have an employer.
Focus on this basic reality, and you have to wonder whether bonus payments in the banking sector will ever be considered appropriate or acceptable in the current climate.