Bonus or no bonus?

Love it or hate it but I do have to touch upon the issue of bonuses in the banking world. This is so to the fore of peoples’ minds in the UK, especially because a certain bailed out bank has been reported to preparing to pay £1bn in bonuses. Yes, it is RBS I’m referring to.

A reaction to this from the FSA’s new chairman, Lord Adair Turner was that it was necessary to ask important and difficult questions about the bonus systems found in the world of banking. The view was echoed by the PM, Gordon Brown who referred to certain unacceptable features of the bonus system. A system that could be seen not to reward long-term benefits and growth but rather short-term and risky behaviour. Lord Adair Turner went so far as to say that the FSA could penalise banks who pay bonuses that encourage the wrong kind of business.

Let’s pause and look at the remuneration scheme at the FSA. Here we see rewards related to meeting objectives as well contribution to success and goals. So far nothing very different from the banks and this is the same for the criteria for annual bonus rewards – performance and delivery. But then we get to the third point: “demonstrate the behaviours we value.” I expect/hope that these values are made clear by the FSA.

And that is the point really, are the values of the company made clear? Apparently the values of certain banks until now have been gains for the sake of gains but nothing about the nature of these gains. So yes, a revision is essential.

So now many people in the banking world now fear for their bonuses and that is fair if you are on the low rungs of the ladder and need the bonus to balance your personal books at the end of the year. But the fact-cat bonuses? No, I can’t support that.

KPMG thinks it unlikely that the regulators will want to instill rigid models but do expect pressure on the bonus scheme and foresee big changes to these schemes in the future. Some experts expect to see more bonuses paid out e.g. in the form of shares that cannot be sold for several years and this I suppose could instill in employees an interest of that of the shareholder who is often in the ‘game’ for long-term gains.

A personal closing note: I am a taxpayer of the UK and I bank with one of the bailed out banks that may use my tax money to pay fat-cat bonuses. Will I choose to take my business elsewhere if they persist in that? I am very likely to.


End of another year

Today has been hectic with various exam board meetings for our MBA programmes including our executive MBA for KPMG.  At one of our meetings we dealt with the award of the degree for the outgoing full-time MBA class.  Amazing that it was already time for that.  A number of students came during the afternoon to collect their letters of confirmation and it was so nice to see the elation for those who achieved the Distinction and the disappointment for those who fell just short.  CONGRATULATIONS ALL!  You’ve worked hard and you deserve your success. 

It was also somewhat interesting to see the void that some felt, now that it is all over.  Well of course it isn’t all over but you know what I mean.  It makes a huge difference that no one is expecting you in class tomorrow or next week.  A number have already secured jobs while others are now ready to apply for the Tier 1 visa that permits a graduate to remain here as a highly skilled worker.  Later on, on 3 December, we will have the formal Graduation in McEwan Hall.  As I’ve mentioned before in my blog – it is sad to see them leave but great to have met and worked with these people for a year.

On a personal note, I had a nice long weekend with my long term friend.  I wrote about that in my last entry.  Good to spend some quality time together and dissect the World; and everything else such as why we should be grateful to the Ethiopians who apparently discovered coffee, and why listening to the water float by in a river or a stream seems so soothing.  Does anyone know?