Why is it that banks are so convinced that the best way for them to succeed is to offer mega-bonuses to their senior staff?
The Royal Bank of Scotland had to get approval from the Treasury for its plan to pay about £550 million pounds in staff bonuses for 2013 – all this despite expected losses estimated at around £8 billion. It’s understood that the details will emerge tomorrow (Thursday) when the bank plans to unveil a ‘strategic review’ of its investment banking and international operations. If reports are correct, this could lead to the the group cutting up to a quarter of its workforce, currently some 120,000 people.
The news comes despite the Prime Minister, David Cameron, promising last month that the government would use it power as an 81% shareholder to block such a move. Labour has already called on the Government to stop RBS from paying its top staff bonuses worth twice their salary.
RBS is not alone in prompting an angry reaction from the public, politicians and trade unions over the issue. Barclays announced that it would increase its bonuses by 13% to £2.4 billion, despite announcing plans to cut 12,000 jobs. Another bank to bring public opprobrium on its own head was HSBC when it confirmed that it would pay its chief executive, Stuart Gulliver, allowances worth £32,000 a week – on top of his £1.2m salary. The idea was to get around the EU’s cap on bonuses. Others are expected to follow suit.
But it’s worth recalling a talk given during one of the TED conferences. Dan Pink’s analysis came at the height of the financial crisis and is a damning critique of what he describes as the failed policy of rewarding people with bonuses – and he presented the evidence to prove it. It seems that the bankers just haven’t been listening to the scientific proof. It’s worth hearing again exactly what he said.