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Old 11.01.2011, 12:36
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How about a limit on your bonus?

Just wanted to gauge opinion here with all the fuss about the size of the bonus given (earned?) to some Bankers.

How about we pass a law across the EU that restricts a bonus to a maximum of 10% of your annual salary? This is across all industries/job descriptions. What is the upside of this? What negative effects would it have?

You do a job and you get a basic salary, if you do it well then you can get a maximum bonus of 10%. Seems fair doesn't it, or am I missing something?
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Old 11.01.2011, 12:38
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Re: How about a limit on your bonus?

Seems very fair to me - hope all the excellent nurses, teachers, and so many other dedicated workers out there will get your proposed bonus.
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Old 11.01.2011, 12:40
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Re: How about a limit on your bonus?

I don't think the EU should be passing ANY laws on what companies/institutions pay they're employees. Bonus or otherwise.
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Old 11.01.2011, 12:40
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Re: How about a limit on your bonus?

In many cases base salaries would have to rise if a max bonus level of 10% was in place. Fix it at 30% and you'd be closer to the real world.
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Old 11.01.2011, 12:41
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Re: How about a limit on your bonus?

So those poor bankers only get 100,000 bonus from a 1 million dollar salary? I like the idea that there should only be a certain percentage difference between the lowest and highest paid employees. Victorinox has a system like this.
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Old 11.01.2011, 12:42
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Re: How about a limit on your bonus?

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I don't think the EU should be passing ANY laws on what companies/institutions pay they're employees. Bonus or otherwise.
Well, they wouldn't be dictating salaries or anything. Just a simple rule that a bonus may not be more than 10% of annual salary.
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Old 11.01.2011, 12:43
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Re: How about a limit on your bonus?

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Just wanted to gauge opinion here with all the fuss about the size of the bonus given (earned?) to some Bankers.

How about we pass a law across the EU that restricts a bonus to a maximum of 10% of your annual salary? This is across all industries/job descriptions. What is the upside of this? What negative effects would it have?

You do a job and you get a basic salary, if you do it well then you can get a maximum bonus of 10%. Seems fair doesn't it, or am I missing something?

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.

I don't care much about bonuses, pay them billions if they make hundreds of billions, but make the buggers pay back if there are losses.
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Old 11.01.2011, 12:43
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Re: How about a limit on your bonus?

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You do a job and you get a basic salary, if you do it well then you can get a maximum bonus of 10%. Seems fair doesn't it, or am I missing something?
You're missing something.

Many of us in fields like professional services, sales and more receive a very large portion of our salary as variable pay. This motivates us to work hard, get new clients, etc.

If you put us all on fixed pay, we'll stop working as hard - why pull 16 hour days if you're only going to get an extra 10% of your salary?

And of course, if you were to pass this sort of law in one country, it would simply drive the top people out to another country - possibly taking their organization with them - meaning that the local economy will stagnate, or at least suffer pretty quickly.

Bonuses are fine - if anything is to be regulated, you should check to make sure that bonuses were actually earned (for example, linked to strong actual performance indicators rather than stock price).
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Old 11.01.2011, 12:44
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Re: How about a limit on your bonus?

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So those poor bankers only get 100,000 bonus from a 1 million dollar salary? I like the idea that there should only be a certain percentage difference between the lowest and highest paid employees. Victorinox has a system like this.
Well yes, but isn't that better than a 100,000 salary and a 1,000,000 bonus? I like the Victorinox system though....I think some other places also have a similar system but can't recall who they are.
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Old 11.01.2011, 12:45
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Re: How about a limit on your bonus?

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So those poor bankers only get 100,000 bonus from a 1 million dollar salary? I like the idea that there should only be a certain percentage difference between the lowest and highest paid employees. Victorinox has a system like this.
the problem isnt the bankers, its the banks. The banker only gets a small proportion of the money they are making for the bank. The root cause is that the banks make so many billions of CHF's per year. If the banks were forced to be less profitable (globally as regionally wouldnt work) then less money would go in bonuses. Bankers bonus's are like ferrari's: lots of people shout abuse at them when one drives past, but if the driver got out and said "here you go mate, do you want this I'm tired of it" that person would jump in like a flash.
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Old 11.01.2011, 12:48
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Re: How about a limit on your bonus?

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You're missing something.

Many of us in fields like professional services, sales and more receive a very large portion of our salary as variable pay. This motivates us to work hard, get new clients, etc.

If you put us all on fixed pay, we'll stop working as hard - why pull 16 hour days if you're only going to get an extra 10% of your salary?

And of course, if you were to pass this sort of law in one country, it would simply drive the top people out to another country - possibly taking their organization with them - meaning that the local economy will stagnate, or at least suffer pretty quickly.

Bonuses are fine - if anything is to be regulated, you should check to make sure that bonuses were actually earned (for example, linked to strong actual performance indicators rather than stock price).
So possibly you could end up with a higher basic salary with less hours worked then and stilll get a 10% bonus if you do well. I think we could differentiate between 'commission' paid on good sales figures and a bonus paid for good work.
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Old 11.01.2011, 12:51
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Re: How about a limit on your bonus?

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the problem isnt the bankers, its the banks. The banker only gets a small proportion of the money they are making for the bank.
Yes I think the problem is the banks, but also when the banks overall get bailed out by the taxpayer for losing billions how can they then pay a bonus?

If the overall business is not going well then how can a bank pay such a large bonus? It cannot all be tied to personal performance or can it?
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Old 11.01.2011, 12:51
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Re: How about a limit on your bonus?

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So possibly you could end up with a higher basic salary with less hours worked then and stilll get a 10% bonus if you do well. I think we could differentiate between 'commission' paid on good sales figures and a bonus paid for good work.
Unlikely. Bonuses are used because, for good or ill, they do tend to motivate certain types of people. Without that motivation, production would be lower, and thus overall pay would have to be lower - that money that comes in on the 25th has to get to the company's coffers somehow.

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If the overall business is not going well then how can a bank pay such a large bonus? It cannot all be tied to personal performance or can it?
See my comment about linking them to real performance indicators (at least for executives, where such might be possible).
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Old 11.01.2011, 12:59
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Re: How about a limit on your bonus?

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Yes I think the problem is the banks, but also when the banks overall get bailed out by the taxpayer for losing billions how can they then pay a bonus?

If the overall business is not going well then how can a bank pay such a large bonus? It cannot all be tied to personal performance or can it?
Depends on whether you have earned the bonus. If the bank has lost money but your sector in these huge institutions has made money then you fully deserve your renumeration ? Otherwise there is little motivation to work if your bonus is pulled down by those around you.

If bonus's are too small you end up without motivated staff. Some professions should not have bonus's (e.g. hospital anethaetist) and some should (e.g. car salesman).

Regarding the failing bank principle, that is a different question. The fact that the banks were bailed out by the government via us is the fault of the government(s) who should have stopped such reckless speculation.
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Old 11.01.2011, 13:00
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Re: How about a limit on your bonus?

I agree that a bonus motivates people but can we also say then that it de-motivates people if they don't get one? Yes of course, so why not make it fairer to all by increasing the basic salary and capping the bonus (at say 10%).

In a free-market economy you can as an employer sack underperforming employees if 10% isn't enough to make them work hard.
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Old 11.01.2011, 13:03
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Re: How about a limit on your bonus?

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I agree that a bonus motivates people but can we also say then that it de-motivates people if they don't get one? Yes of course, so why not make it fairer to all by increasing the basic salary and capping the bonus (at say 10%).

In a free-market economy you can as an employer sack underperforming employees if 10% isn't enough to make them work hard.
because it does not make financial sense. Take a banker with a salary of 250k and a bonus of 1 million. max cost to bank: 1.25 million.

If the same employee is to be limited to 10% bonus you cannot pay him 250k, otherwise you are not arguing about bonus rates your arguing about salary levels which is a different and almost impossible situation to correct in a global free market economy as the employee will move elsewhere. Therefore if the employee is limited to 10% bonus the salary would have to be around 6-700 at least to make it worth him staying. If he fails to perform he is sacked, but it has cost you 600k. If he fails to perform on 250k then he is out at 250. Less loss to bank.

These arguments are not connected to the different question of bonus's for people who have lost money at banks which is completely unjustified.
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Old 11.01.2011, 13:05
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Re: How about a limit on your bonus?

and of course not every job is suitable for a bonus.

I'm just trying to see what the general opinion of the bonus is and if capping it would be popular. I'm not sure that current bonus systems are fair, and just want to see if popular opinion is with the headline writers.

Maybe we should ditch the bonus altogether and if you do a good job you get a pay rise next year...and if you don't then you either get a pay cut, stay where you are or get fired.
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Old 11.01.2011, 13:06
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Re: How about a limit on your bonus?

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These arguments are not connected to the different question of bonus's for people who have lost money at banks which is completely unjustified.
I tend to agree, but *what-if* , said Banker actually reduced the loss from Billions to Millions, i.e. getting a bonus on the money he saved rather than made the company ?
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Old 11.01.2011, 13:09
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Re: How about a limit on your bonus?

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I tend to agree, but *what-if* , said Banker actually reduced the loss from Billions to Millions, i.e. getting a bonus on the money he saved rather than made the company ?
interesting point - depends on whether the loss of billions is considered the benchmark. If so, then a loss reduction from the perspective of that person is an increase in terms of earnings, so bonus.

However if market conditions pointed to that persons bank would in all likelihood have reduced from billions to millions anyway as the economy picked up then they may not have made (not lost) money so perhaps not.

in short, you can't answer it without the surrounding economic information.
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Old 11.01.2011, 13:11
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Re: How about a limit on your bonus?

What is also interesting is that almost by default the conversation has stayed largely to the banks.

And it is possible that people who have lost money see it a certain way.

I think maybe this is the problem - not the bonus itself but the overall obsession with money full stop. Large salary and large bonus is still the dream for most people. Small salary and massive bonus makes it all better still...
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