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Can Bonuses Ever Be Justified Again?

With the country suffering through the worst recession in living memory there has been understandable public dismay at large bonus payments to senior executives. When those bonuses have gone to executives who are widely seen as responsible for creating the financial crisis, that dismay has tipped over into anger.

Sir Fred Goodwin of the Royal Bank of Scotland, commonly known as Fred the Shred, has been at the centre of all this, having pocketed a pension fund worth more than £16 million, despite bringing one of the UK’s oldest and most respected banking institutions to its knees. In March he became the victim of an anti-banking group called ‘Bank Bosses Are Criminals’ who vandalised his home.

In February, Royal Bank of Scotland, now 70 per cent owned by the taxpayer and which has received £20bn in public funds, cut its planned £1bn bonus pool by 90 per cent after pressure from the Government.

In the US, President Barack Obama has expressed anger at $165m bonuses pledged to executives of bailed-out insurer AIG, calling the payments “an outrage”. “It’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165m in extra pay,” he said.

Yet despite this, City workers have continued to pocket their bonus payments. survey conducted by the City recruitment consultancy Morgan McKinley revealed that 73 per cent of those working at 200 banks and other financial institutions in the UK received bonus payments in 2008. 16 per cent said their bonuses had actually increased.

All of this has served to put the issue of bonuses firmly under the spotlight. While the issues have centred on bonuses awarded to bankers, it has led some in the sales profession to think about the bonuses that they receive and pay. Can bonuses be justified, and if so, how should they be awarded?

 

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