Go Back   English Forum Switzerland > Off-Topic > Off-Topic > International affairs/politics  
Reply
 
Thread Tools Display Modes
  #61  
Old 11.01.2011, 23:29
dmay's Avatar
Member
 
Join Date: Mar 2010
Location: Stetten, Aargau
Posts: 236
Groaned at 1 Time in 1 Post
Thanked 436 Times in 122 Posts
dmay has a reputation beyond reputedmay has a reputation beyond reputedmay has a reputation beyond reputedmay has a reputation beyond repute
Re: How about a limit on your bonus?

Seeing this conversation, I feel the need to point out that, within banking, we have empirical evidence that the system does not work. We created a system that produced "profits" (in the short term) at an astounding rate, and paid mind-boggling salaries, attracting the best and brightest away from hard science and medicine to play finance games, and brought the world economy to its knees, reaching into all our pockets for a massive bailout to stave off another Great Depression and major social unrest.

At the end, I struggle to think that banks create remotely as much value as they claimed to, and their various mechanisms for funneling fortunes to their employees are wholly unjustified. What is mystifying to me is that a new wave of 30's era banking regulations have not emerged - a testament to the political clout they are able to buy.

Harping on bonuses is nipping at the edges. Rest assured that the person who can dream up a "CDO squared" can find another way to get his millions. Limiting bonuses will likely only limit to honest among us.

EDIT: rereading this, I realize I need some. Please flame this rambling nonsense with my blessing.

So, short answer: no I don't think such a law is a good idea - mainly because it will likely do no good and some probable bad.

Last edited by dmay; 11.01.2011 at 23:34. Reason: I was stupid.
Reply With Quote
This user would like to thank dmay for this useful post:
  #62  
Old 11.01.2011, 23:35
Guest
 
Posts: n/a
Re: How about a limit on your bonus?

Would you be able to kindly answer my last question re banks refusing to lend to small businesses and responsible house-buyers, etc, please? Thanks.
Reply With Quote
  #63  
Old 11.01.2011, 23:49
eyebeebe's Avatar
Forum Veteran
 
Join Date: May 2009
Location: Pfäffikon SZ
Posts: 2,303
Groaned at 21 Times in 20 Posts
Thanked 3,107 Times in 1,312 Posts
eyebeebe has a reputation beyond reputeeyebeebe has a reputation beyond reputeeyebeebe has a reputation beyond reputeeyebeebe has a reputation beyond reputeeyebeebe has a reputation beyond reputeeyebeebe has a reputation beyond repute
Re: How about a limit on your bonus?

Quote:
View Post
I fully agree that this is how it should be, but I do not agree that this is reality right now. Up to a certain level are the payments a fair tool to keep motivation up and if somebody is bringing a lot of value for the bank, why not give him a fair share of it. But again: The CS CEO got over 70 Million CHF last year.
Your job as CEO is to use the capital the share holders gave you and make a profit in the most efficient way. Did he do so if he takes a salary like this? You sure do deserve a fair salary and a decent bonus for this demanding job. But 70 Million CHFs per year? The German chancellor for examples earns some 20.000 Euro a month plus some benefits...
I agree with 90% of your posts Trev, but this one is just plain wrong. Yes Dougan got paid out CHF 70m last year. This figure did not relate to 2009 though. It was a payout from a long-term incentive plan that was set up years ago, well before he became CEO. It was set-up to retain key senior staff at a time when CS wasn't doing well and to incentivise them to grow the business. It's exactly the kind of thing people on this thread and global regulators have been calling for: Rewards relating to long-term performance. He hit the targets set, he got paid out.
Reply With Quote
This user would like to thank eyebeebe for this useful post:
  #64  
Old 11.01.2011, 23:54
phdoofus's Avatar
Forum Veteran
 
Join Date: May 2009
Location: City by the Bay
Posts: 2,357
Groaned at 96 Times in 56 Posts
Thanked 3,205 Times in 1,227 Posts
phdoofus has a reputation beyond reputephdoofus has a reputation beyond reputephdoofus has a reputation beyond reputephdoofus has a reputation beyond reputephdoofus has a reputation beyond repute
Re: How about a limit on your bonus?

The problem isn't bonuses. The problem is being allowed to create dodgy financial instruments (e.g. collections of toxic mortgages sold as AAA paper), collude with ratings agencies, create further dodgy financial instruments (e.g. credit default swaps) and then, when it all goes to shit, they all get bailed out and not one goes to jail or strung up. If we set up working guillotines in the financial centers of all the major cities and showed the will to use them, there might be a bit more care taken with other people's money and less grubbing after ever last dollar you can get your hand on.
Reply With Quote
The following 2 users would like to thank phdoofus for this useful post:
  #65  
Old 11.01.2011, 23:58
eyebeebe's Avatar
Forum Veteran
 
Join Date: May 2009
Location: Pfäffikon SZ
Posts: 2,303
Groaned at 21 Times in 20 Posts
Thanked 3,107 Times in 1,312 Posts
eyebeebe has a reputation beyond reputeeyebeebe has a reputation beyond reputeeyebeebe has a reputation beyond reputeeyebeebe has a reputation beyond reputeeyebeebe has a reputation beyond reputeeyebeebe has a reputation beyond repute
Re: How about a limit on your bonus?

Quote:
Would you be able to kindly answer my last question re banks refusing to lend to small businesses and responsible house-buyers, etc, please? Thanks.
Banks have been told they need bigger capital reserves, so that they don't need to be "bailed out" again, so they are hoarding cash until they have an appropriate amount.

Secondly, they were burnt lending to people who couldn't afford to make their repayments and lent to them far too cheaply in the first place. There are lots of reasons why they did this. Banks are not blameless in this, but the US/UK (in particular) governments, regulators, the ratings agencies and joe public themselves have a lot to answer for too. Risk is now being priced more accordingly, so often when people say that banks won't lend to them anymore, what they actually mean is that banks won't give out loans on crazy terms anymore: Be it at interest rates that don't correctly reflect the risks involved or at extreme loan-to-values, which give no buffer for declining asset prices.
Reply With Quote
The following 3 users would like to thank eyebeebe for this useful post:
  #66  
Old 12.01.2011, 00:02
eyebeebe's Avatar
Forum Veteran
 
Join Date: May 2009
Location: Pfäffikon SZ
Posts: 2,303
Groaned at 21 Times in 20 Posts
Thanked 3,107 Times in 1,312 Posts
eyebeebe has a reputation beyond reputeeyebeebe has a reputation beyond reputeeyebeebe has a reputation beyond reputeeyebeebe has a reputation beyond reputeeyebeebe has a reputation beyond reputeeyebeebe has a reputation beyond repute
Re: How about a limit on your bonus?

Quote:
View Post
The problem isn't bonuses. The problem is being allowed to create dodgy financial instruments (e.g. collections of toxic mortgages sold as AAA paper), collude with ratings agencies, create further dodgy financial instruments (e.g. credit default swaps) and then, when it all goes to shit, they all get bailed out and not one goes to jail or strung up. If we set up working guillotines in the financial centers of all the major cities and showed the will to use them, there might be a bit more care taken with other people's money and less grubbing after ever last dollar you can get your hand on.
There is nothing wrong with the creation of the "dodgy financial instruments". The problem was with the valuation and pricing of them. I'm not sure that it's true to say the banks and the rating agencies colluded: I think you are giving them far too much credit! IMO the ratings agencies were blinded by dollar signs and were actually professionally negligent in that they didn't understand/care what they were rating and their poor models were gamed by the banks.
Reply With Quote
This user would like to thank eyebeebe for this useful post:
  #67  
Old 12.01.2011, 00:23
flavio's Avatar
Forum Veteran
 
Join Date: Jun 2009
Location: Winterthur
Posts: 764
Groaned at 69 Times in 40 Posts
Thanked 614 Times in 345 Posts
flavio has an excellent reputationflavio has an excellent reputationflavio has an excellent reputationflavio has an excellent reputation
Re: How about a limit on your bonus?

Richard Epstein on bonuses, starts @ 0:45
02:15 to 03:45 is so clear. This guy is brilliant.

Reply With Quote
  #68  
Old 12.01.2011, 01:20
dino's Avatar
Forum Veteran
 
Join Date: Feb 2006
Location: Zurich
Posts: 1,631
Groaned at 31 Times in 24 Posts
Thanked 1,279 Times in 628 Posts
dino has a reputation beyond reputedino has a reputation beyond reputedino has a reputation beyond reputedino has a reputation beyond reputedino has a reputation beyond repute
Re: How about a limit on your bonus?

Quote:
View Post
The problem isn't bonuses. The problem is being allowed to create dodgy financial instruments (e.g. collections of toxic mortgages sold as AAA paper), collude with ratings agencies, create further dodgy financial instruments (e.g. credit default swaps) and then, when it all goes to shit, they all get bailed out and not one goes to jail or strung up. If we set up working guillotines in the financial centers of all the major cities and showed the will to use them, there might be a bit more care taken with other people's money and less grubbing after ever last dollar you can get your hand on.
True... but it ain't going to happen.

a) The politicians get paid off by the financial services industry. Wall street was one of the largest campaign contributors in the US Presidential race.

b) The regulators are always poorly paid compared to those they regulate, so guess where the best brains go..
Reply With Quote
  #69  
Old 12.01.2011, 01:22
dino's Avatar
Forum Veteran
 
Join Date: Feb 2006
Location: Zurich
Posts: 1,631
Groaned at 31 Times in 24 Posts
Thanked 1,279 Times in 628 Posts
dino has a reputation beyond reputedino has a reputation beyond reputedino has a reputation beyond reputedino has a reputation beyond reputedino has a reputation beyond repute
Re: How about a limit on your bonus?

Quote:
View Post
There is nothing wrong with the creation of the "dodgy financial instruments". The problem was with the valuation and pricing of them. I'm not sure that it's true to say the banks and the rating agencies colluded: I think you are giving them far too much credit! IMO the ratings agencies were blinded by dollar signs and were actually professionally negligent in that they didn't understand/care what they were rating and their poor models were gamed by the banks.
S&P and Moody's offer consulting services - to help banks design products that will earn higher ratings from... well S&P and Moody's.

If that's not collusion and conflict of interest, I don't know what is.
Reply With Quote
  #70  
Old 12.01.2011, 07:48
Corbets's Avatar
Forum Legend
 
Join Date: Mar 2007
Location: DK - previously Zug
Posts: 3,321
Groaned at 168 Times in 122 Posts
Thanked 6,707 Times in 2,237 Posts
Corbets has a reputation beyond reputeCorbets has a reputation beyond reputeCorbets has a reputation beyond reputeCorbets has a reputation beyond reputeCorbets has a reputation beyond reputeCorbets has a reputation beyond repute
Re: How about a limit on your bonus?

Quote:
View Post
There are very stupid people in this world that work for long hours in dangerous conditions, trying to save humanity: http://www.doctorswithoutborders.org/

It rather puts bankers' bonuses (Bonii ?) where they belong: with the greedy selfish people of this world. How can these bankers get to sleep at night?

.
Again, it's quite simple - money is not what motivates those people. They gain personal satisfaction from helping others; an admirable trait, sure enough, but not one that leads to financial incentivizes.

On Treverus' point about Brady Dougan - he was the CEO of one of the relatively few very large banks that didn't need a bailout while churning out a good profit. That's a hard job that I, personally, am not qualified for, and apparently the board thought he was worth the money. How does him having a large bonus negatively impact you?
Reply With Quote
This user would like to thank Corbets for this useful post:
  #71  
Old 12.01.2011, 09:00
Guest
 
Posts: n/a
Re: How about a limit on your bonus?

Quote:
View Post
There are very stupid people in this world that work for long hours in dangerous conditions, trying to save humanity: http://www.doctorswithoutborders.org/

It rather puts bankers' bonuses (Bonii ?) where they belong: with the greedy selfish people of this world. How can these bankers get to sleep at night?
On the other hand, in the UK, doctors (not those guys obviously) are on average the highest paid profession.
Reply With Quote
  #72  
Old 12.01.2011, 10:26
Nev
 
Posts: n/a
Re: How about a limit on your bonus?

Just for the record here’s how the system really works.

99% of people who work in the banking industry don’t get paid a lot of money. They get what most of you would consider a decent day’s pay for an honest day’s work. So when you say ”bankers” don’t tar them all with the same brush.

The remaining 1%, typically working in the investment banking side, have a different scale of compensation. Their compensation is high by ordinary standards but it isn’t arbitrary. Like any labour market it’s fixed by supply and demand and the pool of available employees in the global market with the appropriate skills/qualifications isn’t that big. If you need to hire a trader with 7 year’s experience the market is so tight that you will have to go to a competitor to poach one of theirs because that kind of skill isn’t available elsewhere. Theirs no point drawing a comparison with doctors because the compensation levels are effectively set by an auction and the best talent goes to those who bid the highest. Just like the entertainment/sports industry, Banks bid the levels they do because they can. The healthcare industry can't. You might not like it, but that’s how free markets work and no politican will argue against that. You might think it's morally wrong that some bankers and entertainers get paid multiples of care workers but that's a different discussion.

That level of compensation for each grade in this 1% is called Total Reward and even though that TR may be split 20% fixed salary and 80% bonus, in reality little of it discretionary/performance related. It’s just the going rate you have to pay to recruit a person with those skills, at that level.

There’s very little flexibility if you want to keep your people and operate your business. In average to bad years that Total Reward might get tweaked down 10% or so. In good years it might get tweaked up 10% to 15%. It’s a kind of principle that in good/bad years a rising/falling tide lifts/lowers all the boats. The aim is to deliver stability in earnings, not volaitiliy from one year to the next.

If somebody outperforms massively in any one year, they yes, they will get a outsized performance related bonus for that one year, but that is a tiny proportion of that 1% of bankers.

In a nutshell therefore the bulk of a bank’s total compenation budget is fixed. This is why the focus on bonuses is a red herring. In really bad years the way the banks manage this compensation payout is not by slashing compensation payouts across the board but by cutting headcount. People the bank want to eliminate may get zero bonuses to encourage them out of the door voluntarily or they may go for involuntary reductions and make staff redundant.

As regards that 1%, what has changed as a result of the financial crisis is the structure of how those Total Rewards are paid for the high earners. Far less is now paid out in cash. Far more is paid in equity. Much more is deferred for a number of years and subject to claw back if the employee screws up.
Reply With Quote
The following 7 users would like to thank for this useful post:
  #73  
Old 12.01.2011, 10:53
nigelr's Avatar
Forum Veteran
 
Join Date: Apr 2009
Location: Aargau
Posts: 1,712
Groaned at 118 Times in 59 Posts
Thanked 2,140 Times in 942 Posts
nigelr has a reputation beyond reputenigelr has a reputation beyond reputenigelr has a reputation beyond reputenigelr has a reputation beyond reputenigelr has a reputation beyond repute
Re: How about a limit on your bonus?

Quote:
Would you be able to kindly answer my last question re banks refusing to lend to small businesses and responsible house-buyers, etc, please? Thanks.
It's a good point. Apparently a deal has been done where the banks keep paying high bonuses if they open up their lending criteria. Personally I don't hold much hope that this will actually amount to anything...
Reply With Quote
  #74  
Old 12.01.2011, 10:57
nigelr's Avatar
Forum Veteran
 
Join Date: Apr 2009
Location: Aargau
Posts: 1,712
Groaned at 118 Times in 59 Posts
Thanked 2,140 Times in 942 Posts
nigelr has a reputation beyond reputenigelr has a reputation beyond reputenigelr has a reputation beyond reputenigelr has a reputation beyond reputenigelr has a reputation beyond repute
Re: How about a limit on your bonus?

Quote:
View Post
There are very stupid people in this world that work for long hours in dangerous conditions, trying to save humanity: http://www.doctorswithoutborders.org/

It rather puts bankers' bonuses (Bonii ?) where they belong: with the greedy selfish people of this world. How can these bankers get to sleep at night?

.

Why are they stupid? and I am not sure all bankers are greedy, but I guess bankers by nature have a love for money.

I'm not a banker by the way, and in my job (Engineer/musician) I don't get a bonus....
Reply With Quote
  #75  
Old 12.01.2011, 11:01
amogles's Avatar
Forum Legend
 
Join Date: Mar 2008
Location: Zurich
Posts: 12,361
Groaned at 340 Times in 276 Posts
Thanked 26,264 Times in 11,001 Posts
amogles has a reputation beyond reputeamogles has a reputation beyond reputeamogles has a reputation beyond reputeamogles has a reputation beyond reputeamogles has a reputation beyond reputeamogles has a reputation beyond repute
Re: How about a limit on your bonus?

Quote:
View Post
Hardly an incentive ... Bankers see bonuses as commission, the more profit they make for their bank , the more they get in their bonus. The bad would stay bad and the good would flounder. How would a bank poach another banker working for a competitor if he couldn't offer a better bonus ? All that would happen would be that salaries would have to go up to compensate, and banks don't like that as it affects pensions , sick pay and general bums on seat costs. They like to pay out of their profit, and not out of their running costs, bonuses can be adjusted, whereas it's quite hard to adjust salaries.
If only. The problem with bonuses is that, apparently, they cannot be adjusted. The formula according to which the bonus is calculated is part of the working conditions. This is why UBS was paying bonuses even though the government was having to bail them out.

I don't work for a bank but for an industrial company and we had one top manager who through some clever legal loophole was still drawing a bonus three years after being fired. He was fired for being caught manipulating the bonus system in a big way and to his own advantage. they could fire him for that but sick as it sounds, they couldn't stop the payments worth several 100K. The problem with bonuses is that there is nothing voluntary about them.
Reply With Quote
This user would like to thank amogles for this useful post:
  #76  
Old 12.01.2011, 11:02
economisto
 
Posts: n/a
Re: How about a limit on your bonus?

I think the EU should pass a law making basic pay illegal. You only get a bonus/commission/profit share based on your performance. All these lazy people turning up to work and facebooking the day away would get a bit of a surprise.

And yes, all roles in private companies can be commission/ performance pay linked.
Reply With Quote
The following 6 users would like to thank for this useful post:
  #77  
Old 12.01.2011, 11:04
nigelr's Avatar
Forum Veteran
 
Join Date: Apr 2009
Location: Aargau
Posts: 1,712
Groaned at 118 Times in 59 Posts
Thanked 2,140 Times in 942 Posts
nigelr has a reputation beyond reputenigelr has a reputation beyond reputenigelr has a reputation beyond reputenigelr has a reputation beyond reputenigelr has a reputation beyond repute
Re: How about a limit on your bonus?

But isn't the problem that your bonus depends on what you 'sell', and once you reach saturation and everyone who can reasonably borrow has borrowed the only thing left is to lend to people who cannot afford it?

The only way to get a bonus at such a late stage in the market is to lend to people who you know are not able to pay it back. But if you don't do this then you get fired, lose your bonus etc....
Reply With Quote
  #78  
Old 12.01.2011, 11:07
economisto
 
Posts: n/a
Re: How about a limit on your bonus?

Quote:
View Post
There are very stupid people in this world that work for long hours in dangerous conditions, trying to save humanity: http://www.doctorswithoutborders.org/

It rather puts bankers' bonuses (Bonii ?) where they belong: with the greedy selfish people of this world. How can these bankers get to sleep at night?

.
I hope you're not serious. Medicins sans frontiers are great, but bankers provide the liquidity (money) for them and everyone else to exist in the first place. You are the kind of person who believes everyone should give more charity, and then send your 3chf a month to the black hole of corruption we call Africa. Build Banks there! The regulatory certainty and liquidity they'll provide will solve all their problems.
Reply With Quote
  #79  
Old 12.01.2011, 11:09
economisto
 
Posts: n/a
Re: How about a limit on your bonus?

Quote:
View Post
But isn't the problem that your bonus depends on what you 'sell', and once you reach saturation and everyone who can reasonably borrow has borrowed the only thing left is to lend to people who cannot afford it?

The only way to get a bonus at such a late stage in the market is to lend to people who you know are not able to pay it back. But if you don't do this then you get fired, lose your bonus etc....
No bank has ever lent to anyone who can't afford it. People have borrowed from banks when they cannot afford the repayments. Why is it that people are so sheepish and scared of life that they blame their foolish behaviour on the people who lent them the money?

Seriously, sometimes I really feel like there's a Candid Camera crew in the next room with these posts.
Reply With Quote
  #80  
Old 12.01.2011, 11:09
nigelr's Avatar
Forum Veteran
 
Join Date: Apr 2009
Location: Aargau
Posts: 1,712
Groaned at 118 Times in 59 Posts
Thanked 2,140 Times in 942 Posts
nigelr has a reputation beyond reputenigelr has a reputation beyond reputenigelr has a reputation beyond reputenigelr has a reputation beyond reputenigelr has a reputation beyond repute
Re: How about a limit on your bonus?

Quote:
View Post
If only. The problem with bonuses is that, apparently, they cannot be adjusted. The formula according to which the bonus is calculated is part of the working conditions. This is why UBS was paying bonuses even though the government was having to bail them out.

I don't work for a bank but for an industrial company and we had one top manager who through some clever legal loophole was still drawing a bonus three years after being fired. He was fired for being caught manipulating the bonus system in a big way and to his own advantage. they could fire him for that but sick as it sounds, they couldn't stop the payments worth several 100K. The problem with bonuses is that there is nothing voluntary about them.
So, if a bonus CAN be justified then it can go uncapped? Or should we have a system where all bonus schemes are 'regulated' or sanity checked to make sure they are performance related and then capped at a reasonable level?
Reply With Quote
Reply




Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
2010 bonus Duncheg Employment 75 12.01.2011 17:07
Banking Bonus ? dodoGB Employment 7 02.10.2010 13:15
Relocation bonus monkeynut Finance/banking/taxation 10 08.04.2008 09:59
Yearly Bonus Info Employment 16 02.04.2008 01:19
Bonus question donut Employment 5 16.02.2007 10:47


All times are GMT +2. The time now is 21:11.


Powered by vBulletin® Version 3.8.4
Copyright ©2000 - 2022, Jelsoft Enterprises Ltd.
LinkBacks Enabled by vBSEO 3.1.0