Bankers invent new way to get paid too much

26 Feb

HSBC boss Stuart Gulliver. Photo by World Economic Forum (Licence here)

HSBC boss Stuart Gulliver. Photo by World Economic Forum (Licence here)

This week HSBC announced it would in future be paying its top bankers ‘fixed pay allowances’, in order to circumvent new EU rules restricting bonuses. According to the Guardian the bank’s chief executive Stuart Gulliver will be taking home at least £4.2 million a year in future.

New EU rules restrict bonuses to 100% of a banker’s pay, unless approved by shareholders. With approval from shareholders the cap may be raised to 200% of pay.

Last week our Prime Minister spoke of his ‘moral mission’ in welfare reform. He said ‘our long-term economic plan for Britain is not just about doing what we can afford, it is also about doing what is right’. If the moral mission does not include tempering the excesses of the banking sector, is the mission at all legitimate.

The highest paid employee at HSBC in 2013 earned £7.06 million through salary, bonuses and other payments. It would have taken me in my last job nearly nine hundred and fifty years to earn this figure without overtime. If the government allows this to happen is that doing what is right? Is this level of decadence even slightly defensible when the government’s 2008 banking bail out ran into the hundreds of billions of pounds?

According to the National Audit Office the banking sector at one point owed the government £1.162 trillion in various loans, schemes and shares. Much of this has now been paid off, but the cost in terms of businesses destroyed, jobs lost and lives damaged thanks to their irresponsible actions is immeasurable. Given this legacy wouldn’t the socially responsible thing to do be to make more jobs and help more businesses?

According to Reuters, HSBC chief executive Stuart Gulliver has slashed 40,000 jobs globally in the last three years. He has also ‘sold or closed 60 businesses’. As a result the bank saw a rise in pre-tax profit of 9% to £13.6 billion. It seems that £3.9 billion of this has gone into the so called ‘bonus pool’. Between this excess and a handful of Londoners claiming £80,000 in housing benefit the Prime Minister has made clear which he believes requires the more urgent reform.

Perhaps it’s time someone at the Treasury sat down with a calculator and worked out how many small businesses or secure jobs could be made for £7.06 million. Alternatively Chancellor George Osborne may want to take a look at Royal Bank of Scotland, the bank in which our government holds an 81% share.  A number of news agencies are reporting that a Treasury agency is permitting the nationalised bank to spend £550 million on staff bonuses for 2013. Perhaps this is a reward for a successful year? RBS has not yet disclosed its profits, but Reuters and Sky report an estimated loss of around £8 billion.

Inside sources also tell Reuters RBS could cut up to 30,000 of its workers in coming years. How many of these job losses come from low level staff and how many come from those in line for millions in bonuses?

What is the government doing to deal with these excessive bonuses? Well, the Prime Minister has made clear that, at RBS at least, bonuses will not inflate further from their current ridiculousness.

The government will also be taking its opposition to the EU bonus cap to the European Court of Justice. If you’re wondering whether you read that right – yes, our government is legally challenging a rule that restricts bankers from taking home more in bonuses than their normal salary. It seems our government is worried the rule will simply lead to higher normal salaries to make up for smaller bonuses.

Apparently it has occurred to no one that bankers should just accept a more reasonable wage packet.

Our banking sector has cost us infinitely more economically and socially than any problems with the welfare system. Unfortunately our government seems more interested in making things harder for struggling households than holding the super-rich to account.


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