How low should bonuses go to placate the BBC?

7 January 2011

2 minute read

How low should bonuses go to placate the BBC?

It's happened: "BBC news has learnt that the banks are again preparing to payout billions of pounds in staff bonuses despite weeks of talks with ministers about restraint." As a result of this, "banks and minister know there will be an outcry." And this is all happening even though, "ministers couldn't have been clearer what they were expecting from the banks after they were rescued by taxpayers - no more jumbo bonuses paid to bank staff who would probably have been out on the streets had it not been for the multi-billion pound bailouts."

Banks are still paying bonuses.

Robert Peston, the BBC's business editor, 'unearthed' this last night, and has been doing a tour of Corporation's various news delivery channels transmitting this revelation ever since.

Last night, Peston's was the lead story on the BBC's World Tonight programme. Today, it's infiltrated the Independent with the headline, "Banks to defy ministers over bonus billions."

To offset these billions 'banks' are reportedly committing to lending money to small businesses, but they haven't decided how much yet.

What isn't mentioned, however, is that the 'banks' in question can only be HSBC, BarCap, RBS, Lloyds and Standard Chartered; non-UK investment banks in the City don't have small business lending arms.

Also never clarified is that the frequently mentioned figure of 7bn of bonuses (from the CEBR) applies to bonuses across all banks in the City - including those beyond the remit of the British taxpayer, and that in any case this suggests a payout of only 12k per head.

Nor is mentioned that for every 100 paid in bonuses, 57% goes directly to the British Exchequer (notably, Labour's banking spokesman, Chris Leslie, also appeared on the World Tonight advocating another bonus tax).

Most significant, though, is the omission of any real acknowledgement that as little as 20% of this year's bonuses paid in cash, with much of the rest deferred for up to five years and that at least 40% will probably be paid in shares whose value could fall in future.

What will it take for "unacceptable" bonuses to become acceptable again?

RBS is already expected to restrict all cash bonuses to 50k per head. This would probably still be deemed excessive given that the average Briton thinks bankers should earn 58k in total compensation. 5k might be about right.

AUTHORSarah Butcher

Global Editor

Go
Goodge
8 January 2011
Private public sector are in a continous state of bail out in europe ( see the car manufacturing industry and the agriculture industry) . The difference is that banks have sort of earned the right to a bail
out because of the amount of taxes they have paid iver the years while the others never pay any because they merely break even of they ever do. Agriculture is the crazy case in both Europe and US. The end user ends up paying more for everything and emerging countries are banned from exporting to rich countries because of protectionism!
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Lu
Luca
8 January 2011
@Simple
To criticise the BBC because it is "almost exclusively reliant for its existence on government bailouts and subsidies" is to misunderstand what the BBC is about. It is not a business and should not be run as one. It is a public service and I am personally happy to keep paying for it, as long as it works for the public good (excellent news and science programmes, fantastic secondary education web site etc).
Having said that, I agree with you on the lack of transparency about things such as salaries of top presenters...
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Si
Simple
7 January 2011
The irony here is that this is coming from the BBC - an organisation that is almost exclusively reliant for its existence on government "bailouts" and subsidies. By implication I am sure Robert Peston would agree that there should there be a similar cap and scrutiny on BBC salaries. I am sure the management layers and top presenters would agree with him ;-)
Even more ironically, the BBC has consistently refused to reveal both what individual talent is paid as well as how many individuals earn more than 150,000 a year. Exactly the type of disclosure they want from the banks.
Now here is a double standard...
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LB
LBJ again
7 January 2011
@Nonbankerboy. Oh yeah, sorry, manufacturing has expanded in December, waw... Is that all you got?
@NM. That's a valid point. And that's the way British economy has grown. Would you bet it can find another way?
Just to be clear, I'm not a banker...
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AN
A N Alyst
7 January 2011
Zero.
For all bankers, given that every one has benefited from government guarantees and virtually free money from central banks.
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