Always amusing to see Polly discussing the details of business. For she always, but always, gets such details wrong.
Barack Obama\’s thundering words resounded around the world this week. He castigated "disgusting payoffs" and "lavish bonuses", fixing a $500,000 pay cap on bailed-out banks and firms.
Actually, no, he didn\’t. That is the maximum for "top executives"….and "top executives" are not the ones that get the really big payouts in investment banking. Those go to the rainmakers, the best of the dealers and deal makers. Who are not top executives at all.
Further, the actual deal is that anything above this sum must be paid in restricted stock. Shares in the company that cannot be sold for some years. This is the way that Bob Diamond at Barclays is already paid (for much of his so called pay packet, at least).
So, no we don\’t have a cap on bonuses, the City already pays some bonuses in hte way Obama is insisting they should be paid and the limits don\’t apply to those who usually get the really big bonuses.
Well done Polly.
In Britain as elsewhere, few top CEOs are foreign and few foreigners want our "talent", as Work Foundation research proved.
In investment banking,. as above, it ain\’t the CEOs. It\’s the traders. And you\’ll find a great deal more variation of origin in a dealing room than you will in the boardroom. There really is international mobility in such things.
The chief executive of Deutsche Bank warned that US talent would flee the bailed-out banks: "Talent will be happy to work for us."
And you don\’t even have to be internationally mobile anyway. Moving from Bank of America New York to Deutsche Bank New York would be enough to get you out from underneath those bonus caps….
What could be done? Abolish bonuses altogether. The evidence is that they don\’t work or have perverse effects. Performance-related pay demotivates losers without motivating winners.
No one has ever quite managed to answer this question of mine. If bonus pay needs to be abolished, who is going to explain this to the John Lewis Group? You know, that worker owned co operative which last year announced a 20% bonus for all staff?
Changing the greed culture needs champions, so turn the Low Pay Commission, which sets the minimum wage, into a pay commission with a remit to set guidelines on the maximum shareholders should tolerate. Obama\’s $500,000 translates in the UK to 15 times the median pay of £23,000. That seems a generous maximum:
I\’d pay good money to see Polly explain this idea to her editor, Alan Rusbridger, and the boss of Guardian Media Group, both of whom earn substantially more than this.
Polly, you might note, earns somewhat below this number.
It would be the right time to raise the minimum wage.
Millions are out of work and now is the time to raise wages?
Friggin\’ genius, don\’t you think? Raising the price of something in over supply?