Bonuses Advent Calendar
António Horta-Osório, the head of Santander UK, is to become the new chief executive of Lloyds Banking Group on an £8m a year pay package . He will receive a basic pay of £1.035m, and an annual bonus of up to £2.33m. He will also be eligible for a payment of up to 420% of his salary, linked to targets that could see him collect about another £5m, bringing the total up to £8.3m (9.8m euro). This is happening in Lloyds, a bank that in 2008, at the height of the financial crisis, was one of the biggest beneficiaries of the £37bn British government injection of public money in the banking system. This comes when thousands of people are losing their jobs at Lloyds.
The proposals made by the Committee of European Banking Supervisors (CEBS) appear to go beyond the G20 rules, introducing stricter thresholds on bonuses. The main concern of the French banks, in this regard, who dislike these proposals intently, is the risk of distorting competition between banks in Europe, Asia and the United States, thereby increasing the likelihood of outsourcing.
At a time when European governments, including the British, are approving harsh austerity packages, directors of FTSE 100 (100 most highly capitalised UK companies listed on the London Stock Exchange) saw their total earnings soar by an average of 55%.
Before being elected Prime Minister of the United Kingdom, David Cameron referring to the crisis tackling the crisis famously said “we are all in it together”. Bart Becht of global consumer goods company Reckitt Benckiser took home £92.6m while workers there only saw an increase of 2% in their pay this year.
The average FTSE 100 chief executive took home £4.9m in total earnings in the year to June. That is at least 200 times the average pay of full-time workers.
HSBC, the global financial services company, has found its own way to comply with new EU-wide regulations likely to be finalized before the end of the year. To get around tightening rules on bonus payout, HSBC plans to double bankers basic pay and proportionally reduce bonuses. Clever but unfair.
According to the Centre for Economics and Business Research (CEBR) bonuses for bankers in London, Europe’s N°1 financial centre, are expected to rise every year in the period 2010-2014.
British Banks assume that the City accounts for about 2.4% of the national economy and losing London’s position among the world’s pre-eminent financial capitals would come at an enormous cost. Banks are clearly saying that tighter caps on bonuses and higher taxes imposed by the government would potentially divert new investment elsewhere in the world. The real problem is that bankers’ pay, even capped or taxed, far exceeds the incomes of millions of people that are struggling on a daily base against unemployment, mortgage payments and cuts in public services.
The British Bankers Association (BBA), facing public anger on scandalous bonuses, has stated that “Outside the UK, the concern on bonuses is limited or doesn’t exist at all”, and argued that any set of international rules on the subject should not penalize British Banks. Regrettably for them, workers across Europe are monitoring what is happening all around Europe on shameful bonuses in crisis and austerity times, and any attempt to minimize or get around the problem will not divert people’s attention.
Despite the crisis and the proposals to limit excesses through new rules and taxation, the majority of bankers in Europe and internationally expect their 2010 bonuses to be higher than their 2009 ones. “Business as usual”.
While Irish citizens will bear the burden of the big austerity package required for the EU and IMF-led bailout, three of the country’s bust banks (AIB, Bank of Ireland and Anglo Irish Bank) have between them awarded themselves over €70m bonuses and pay increases since last year.
Stephen Hester, chief executive of The Royal Bank of Scotland, is going to receive a possible bonus of £2.4m and his colleagues’ Peter Sands of Standard Chartered could go up to £3.2m
Anglo Irish Bank – the bank that contributed more than any other to Ireland’s demise – increased pay by 5% to staff in 2009 and has paid bonuses to 15 employees since January last year.
Eric Daniels of Lloyds, John Varley of Barclays and Micheal Geoghegan of HSBC are leaving the top slots of chief executive next year. Respectively, they are going to receive bonuses of £2.3m, £3m and £5.6m.
After the bailout that skyrocketed Ireland’s deficit, Irish bank AIB – which is majority-owned by taxpayers – paid €700,000 in bonuses to just two senior executives in the first nine months of 2010. Another 41 managers shared a €3.06m bonus budget. Furthermore, Irelands Finance Minister Brian Lenihan admitted that about 300 employees of the bank received individual salary increases for the total sum of €3.4m in the first nine months of 2010.
Allied Irish Banks has backed down on plans to pay out €40m in bonuses following a government warning that it would not provide billions of euro in funding to the bank if it did so. Irish Finance Minister Brian Lenihan told the bank that the non-payment of bonuses is a condition of state assistance for the institution. The bank, which is being kept alive with the support of billions of euro from the taxpayer, was planning to hand over €40m in bonuses to 2400 senior banking
Vince Cable, UK business secretary, had plans to force banks to disclose the number of staff who was paid more than £1m. He was, however, recently contradicted by the UK Chancellor of the Exchequer, George Osborne, who declared that the UK would not unilaterally force banks to disclose pay details and instead would seek a European consensus. A perfect example of an effective lobby by British banks
In a survey conducted by eFinancialCareers.fr, almost half of the 627 financial professionals interviewed expect that their bonus for 2010 will be higher than last year. Indeed 14% of them expect that it will be 50% higher. Moreover, apart from bonuses, 56% of those surveyed saw their wages grow over the last 12 months. For 55% of them, the increase was less than or equal to 10%.
The Institute of Leadership & Management has conducted a survey among 3,300 UK managers. Answering the question “What the ideal Christmas present from your employer would be?”, 48% preferred a cash bonus. Just one in 10 opted for a promotion, with one in six choosing more training and development and 12% saying they would like more staff. Just 11% would prefer to have an increased budget.
The Committee of European Banking Supervisors (CEBS) has adopted guidelines which it believes is a response to answers public anger about outrageous bankers’ bonuses. Under these guidelines, the cash part of bonuses will be restricted and the shares part will be increased, so as to discourage shortsighted and risk-taking behavior by bankers. However, Even if banks are none too happy with these measures, there are serious doubts that they will prevent risky investments being made and in any case, the size of the bonuses remain unaffected.
Carlos Ghosn, current CEO and President of Renault-Nissan, officially receives €1.2m salary from Renault, but he also receives a complementary remuneration from Nissan of about €8m, giving him a total salary of €9,240,809 per year. This sum is 573 times the French minimum wage (€1,344.77 per month gross).
The attempt of some big British banks (Barclays, Royal Bank of Scotland, HSBC, Lloyds and Santander UK) to reach a ceasefire with the UK government looks likely to fail. The aim of the talks, called “Project Merlin”, is on the one hand, to convince the government not to levy new taxes on bonuses and, on the other hand, to show the public that banks are really making an effort to shoulder their part of the burden.
Allied Irish Bank intended to pay €40m in bonuses to 2400 bankers, arguing that a 2008 court case was forcing them to do so. The bank then decided not to pay these bonuses, following a threat from the Irish government to withdraw the taxpayers’ money that is keeping the bank afloat. Now bank chiefs have admitted that new legal action could still be taken by some of those 2,400 executives who were supposed to receive the €40m windfall.
Last year, managers of the 40 biggest French companies received an average salary of €3.06m. That’s 190 times the French minimum wage (Smic). 2.3 million French workers earned the minimum wage last year: i.e. €1,343.77 gross per month (€1,056 net).
Come back later for a new Bonus story
Pourquoi un Bonus Watch ?
Non à l’austérité pour tous et aux bonus pour quelques uns
La CES a décidé de mettre en place un Bonus Watch afin de dénoncer la continuation de versements de bonus astronomiques, de la part notamment, des institutions financières.
Les banquiers continueront à engranger leurs bénéfices et à mutualiser leurs pertes. Les bonus vont pourtant affluer à la fin de l’année mais les banques prétendront que, le gros du montant étant payé en salaires et en actions, ce ne sont pas vraiment des bonus. Personne ne voudra croire ça. Le contraste entre la richesse privée et l’austérité publique ne sera que trop évident.
Dans un contexte de crise économique et sociale extrêmement sévère où de nombreux pays ont adopté des mesures d’austérité contraignant les dépenses publiques et la protection sociale à une diète qui risque d’être corrosive pour l’économie et pour les citoyens, où certains de ces pays se retrouvent au bord de la faillite, les bonus continuent de fleurir et d’augmenter, en particulier en cette fin d’année.
De grandes banques qui se sont perdues dans un appât du gain effréné et provoqué une crise sans précédent depuis les années 30, continuent à faire des profits énormes et à verser des bonus indécents alors même que l’austérité touche le plus grand nombre dans sa vie quotidienne et dans ses perspectives d’avenir.
Argumentaire contre les bonus
Les banques soignent leur image vis-à-vis de l’opinion publique étant consciente que le versement de bonus très importants n’est pas politiquement correct, c’est pourquoi, elles contournent bien souvent le problème en augmentant les salaires fixes de ses traders. Les banques développent également toute une série d’arguments pour justifier leurs décisions et leurs actes. La CES reprend un à un ces arguments afin de remettre en cause leur logique. Bonus ou salaires fixes augmentés ne changent rien. C’est toujours plus d’argent pour les banquiers !
Positions de la CES
Discours prononcé par John Monks lors du Dialogue macro-économique du 16 novembre 2010. (Uniquement en anglais)
Vidéo de la CES
La CES lance la veille Austérité et le Bonus watch (Uniquement en anglais)