RBS bankers get £950m in bonuses despite £1.1bn loss

[AtW]

More than 100 bankers at Royal Bank of Scotland were paid more than £1m last year and total bonus payouts reached nearly £1bn – even though the bailed-out bank reported losses of £1.1bn for 2010.

The chairman, Sir Philip Hampton, said the number of millionaires was lower than a year ago and said a quarter of the group's 18,700 investment bankers would not receive a bonus from the £950m payout pool agreed with UK Financial Investments, which controls the taxpayer's 83% stake in the bank. Unions were baffled that any bankers were getting bonuses.

The 2010 figure is an improvement on the loss of £3.6bn a year ago and the record-breaking £24bn loss in 2008. Even so, the shares were down 3.6% to 45.7p as the losses were bigger than expected and profits in the investment bank fell to £3.4bn from £5.7bn a year ago.

More: RBS bankers get £950m in bonuses despite £1.1bn loss | Business | The Guardian

---

Now surely, this is taking the piss - bonuses are a cost to a business, and they could have very nearly break even if they had not paid out any bonuses, effectively the reason they lost money was this bonus payout. WTF shareholders of that bank are doing, it's not like they are fragmented into small groups that can't deal with this outrage?

[thunderlizard]

If they didn't pay big bonuses, they wouldn't be able to attract the kind of high performers that only lose £1bn and require a reasonably large taxpayer bailout. They'd have to hire second-rate financiers, who might lose £2bn and require an even larger taxpayer bailout. It's the best system that the free(ish) market has come up with, and therefore it is the best possible one.

hth
tl

[AtW]

That's rubbish excuse - fundamentally it violates principle that bonus comes only if firm is profitable, if it's not profitable you should be grateful to keep your job in the first place, nevermind any massive bonuses.

If they can't run firm to make profit then they should be fired.

If nobody else can be found for reasonable money to turn profit then that firm should be sold in pieces to the highest bidders and shareholders should invest money elsewhere.

All of those choices acceptable, what's not acceptable is when staff basically pockets money and leaves shareholdes with losses.

[stek]

I'm with TL on this one, much as it winds me up...

[thunderlizard]

Company profitability is not necessarily a fundamental principle of bonuses.

If your company makes a loss one year, but your cleaner still did a really good job and made all your surfaces consistently sparkly-clean, you'd still pay him/her his/her contractual performance-related bonus, I hope.

Likewise, if your bankers had been given a target to lose less than £3bn this year, and they only lost £1bn, then to fail to pay them bonuses of several hundred million pounds would be practically an infringement of their basic employment rights. They'd be sobbing all the way to the nearest tribunal.

[AtW]

If your company makes a loss one year, but your cleaner still did a really good job and made all your surfaces consistently sparkly-clean, you'd still pay him/her his/her contractual performance-related bonus, I hope.

No - if company is making a loss then it can't pay bonuses - if good job is done to keep it afloat and set it on the right course that will lead to profitability then this person (including directors) should feel content that they still got a job with shareholders not demanding it to be cut, and prospect of proper earned bonus when company becomes profitable.

This of course assumes long term interests put before short term - something that can't be expected from modern investment bankers.

Your example of target loss is laughable - just because it is a target does not mean you get cash bonus for reaching it - keeping your job is a massive bonus you know! I've seen first hand some "sales-lead" companies if you know what I mean, but compared to bankers they are angles because when retail outlet does not hit target then no bonus is given - tough tulip, be grateful you don't get sacked for not hitting profit target.

IMHO bankers should only get shares in bank as a bonus and they should not be able to sell them, use them as collateral etc for 10+ years with dividends being the only cash element they get for a long time.

[thunderlizard]

No - if company is making a loss then it can't pay bonuses

Says who? What else do you think it can't do? Pay salaries? Pay its rent? Buy stock?

Your example of target loss is laughable

I'm glad you got there in the end. I'll go to bed now.

[AtW]

Says who? What else do you think it can't do? Pay salaries? Pay its rent? Buy stock?

Company has to pay necessary amounts such as rent, salaries, power etc.

Bonus is not something that should be guaranteed or expected to happen if company is not doing well (ie losing money).

In some companies (like Waitrose) annual bonus makes big difference to fairly low paid workers, there is no such need to pay out million quid to guys who already are on massive salary, frankly they should have some ability to hold off that new Porsche purchase until firm becomes profitable again.

[Pogle]

Company has to pay necessary amounts such as rent, salaries, power etc.

Bonus is not something that should be guaranteed or expected to happen if company is not doing well (ie losing money).

In some companies (like Waitrose) annual bonus makes big difference to fairly low paid workers, there is no such need to pay out million quid to guys who already are on massive salary, frankly they should have some ability to hold off that new Porsche purchase until firm becomes profitable again.

Yep, I'm with ATW on this one

[TimberWolf]

Yep, I'm with ATW on this one

WPS.