There are certain times every year, where the headlines in the National press are dominated with bonus payouts, usually paired with a public uproar on the value of the pay packets. Lately of course, the uproar is even louder, given that certain banks are over 80% taxpayer owned. But how did this public uproar come about?
Think back to 2008; Lehman’s demise was probably the first time for the UK public to realise that a financial crisis was about to start. There have been crises before, but a combination of traditional and new media ensured that the UK had updates from Lehman’s front door via traditional papers, online media, Facebook and Twitter. Stories of doom and gloom emerged, not only about the redundancies as Lehman people handed out their CVs in Canary Wharf, but also on a much larger scale – the runway to the 2008 financial crisis was paved. With time, the doom and gloom stories were subject to an evolution. From simple company failure to pin-pointing the ones to blame for it all; the bankers and financial sector workers. Had anyone before ever realised the mesmerising numbers that a bonus payout involved? And what to do with such an amount of money? The public uproar in the UK had started.
Ever since the downfall of Lehman’s, which brought the financial services industry and its related payments to the forefront of the general public’s minds, regulators around the world have implemented new rules on bonus payments, which are basically capping cash payments, and weigh in heavily on deferred stock and so on. But the uproar doesn’t slow down. And understandably so, one might think, as the bailed out banks suggest to hand out million(s) of bonuses to single persons (CEOs). Stop the press…that certain CEO waived his bonus now.
But really, I am looking at the bigger picture. Bonuses have been around for longer than Lehman’s. Bonuses have been the best incentive to keep talent. Bonuses are incentivising work force. The public might be upset about the level of bonus payments, and to a degree rightfully so, but at the end of the day the issue is bigger. The real issue is not the payments, but much more the lack thereof. If I’d imagine further regulation of bonuses to take place, if I’d imagine further uproar and personal attacks on leading employees receiving their incentive, I’d also imagine that the City of London will soon be empty.
David Cameron has turned on the EU in order to safeguard the City. But if the public are continuing to “bully” bankers over bonuses, what will keep them in the City, what will keep them in the UK? Bankers are flexible, and are quite happy to move on if they’re not happy. Hong Kong is a nice location, and so is Zurich. And I am not talking holidays here. City banks need to keep incentivising their top people, it is a bare necessity. Cameron tries to save the City, but if public uproar doesn’t ebb down, the City’s brain drain will start.
And then what?