Bonus Fetid Culture
Bonuses are back in the news – to the disgust of those of us not receiving such largess, but what is to be done?
Our disgust I think comes from a number of sources:
- Bonuses for failure
- Annual bonuses that are larger than our lifetime earnings
- Annoyance that those who caused the crash seem to be the first to arise above it
- Annoyance that directors or companies that get fined for misdemeanors (or worse) still get bonuses
- Plain old jealousy (well they are guilty of the cardinal sin of greed – so cut us some slack).
When I was fortunate enough to be in a job that paid a bonus it was simple (and I think moderately reasonable – if indeed it was actually necessary to pay a bonus to get our commitment):
- The company had to have made a profit from which to pay a bonus
- Our team got a portion of the bonus pool reflecting our contribution
- Individual bonuses were dependent on performance and were entirely discretionary
- Bonuses could not exceed 30% of gross pay
Yet bankers and others such as directors of
public privatised utilities can still get bonuses equivalent to a lottery jackpot payout.
The Swiss (!) have voted (BBC News Website 3 March 2013) in a referendum for controls on bonuses:
Some 70% are thought to have supported plans to give shareholders a veto on compensation and ban big payouts for new and departing managers.
I just wonder whether we in the UK might get some level of control by:
- Getting the shareholders to vote annually – in advance – for the size of the executive remuneration pool (to cover salary, benefits, pension, bonuses, golden parachutes, golden handcuffs, golden hellos and all other such payouts etc. etc.)
- Any losses made should be recovered from this pool
- Any fines charged against the company should be paid from this pool
- Should losses or fines exceed the pool, the deficit should be recovered from previously awarded deferred bonuses (share options etc.)
Thus if Network Rail gets fined for Safety failures, the fines are paid by the directors (from their remuneration pool) and not by the taxpayer which in effect is what happens now. Likewise fines due to PPI miss-selling and Libor Fiddling by the banks (particularly the state owned ones) are paid by the directors and senior executives and not by us as shareholders (Lloyds and RBS) or as customers (the rest of them).
If executives feel that that is unreasonable they can go to Zurich.