Idiot stupidity at Compass once again.


UK banks building societies and UK branches
and subsidiaries of overseas lenders would have a
remuneration cap imposed. A low compensation
ratio would be set at around 15%.32

Note 32 says:

32 The compensation ratio is the
percentage of an institutions net
revenue allocated to staff pay

Well, we all know we can play games with the definition of \”net\” revenue.

As a way of tackling flagrant high pay, shoring up
bank balance sheets and providing a level playing
field across the banking sector.
During the boom years investment banks set
aside between 45% and 65% of their net revenue
to pay staff before calculating profits or paying
out dividends to shareholders.33 The latest round
of payouts have had a compensation ratio of
nearer 30–40% as banks try to convince politicians
and the public that they can self-regulate.
High staff costs lead to diminishing profits and
dividends as well as lower capital reserves.

Oh, right…..and this is a giggle:

also puts huge pressure on less profitable institutions
– for example the 2009 compensation ratio
for UBS is 81.2%, which is unaffordable in the
long term.34

Err, yes, we like this. Unsustainable in the long term means they go bust. This is what is suppoed to happen to \”less profitable\” institutions.

But let us ask ourselves what they really mean by only 15% of net revenue to be spent on staff. And I\’m even going to make it really, really easy, and use gross revenue figures for other companies, not net.

As we noted earlier today the staff as a percentage of revenue at the Work Foundation is 77%. So to get that under 15% everyone who works there must have an 80% pay cut.

Hey, works for me.

Or perhaps we might use The Guardian. Staff costs are something like £178 million on turnover of 498 million. About  35% then. So, only a 60% cut in pay to all who work for The Guardian then. My, won\’t they be relieved.

(Best part is that freelancers like myself don\’t count as staff costs, we\’re cost of goods. So they take a pay cut and we don\’t tee hee!).

So, err, anyone think that Compass thought this through before making their suggestion? Anyone at all?

And, of course, we can take the lunacy even further. Here we have a left wing campaigning organisation insisting that, by law, the workers should have a lower share of the production of the sweat of their brows.

Neil Lawson\’s a ringer dumped in there by the Illuminati, isn\’t he? There to make the left look stupid?

6 thoughts on “Idiot stupidity at Compass once again.”

  1. I would have thought that an organisation seeking to enrich employees in general would favour the highest possible percentage of company income went as staff remuneration.
    Do they say where they want the bank to put the money saved by the proposed pay cuts? Spend more on stationary? Fancier buildings? More dividends for the shareholders?

  2. The bank wont get to keep it, there’ll be a windfall tax – Gordon will know what to do with it. He’s good with money you know.

  3. Oh, right. I forgot that we were deriving universal remuneration laws for every company in the country. I mean, if we cap pay for the banks and no one else it would be oh so unfair and the baby Jebus would cry.

    Diddums–don’t cry. Of course you can keep all that money!

  4. Ted, you’re right. This has absolutely nothing to do with economics and improving banking, and everything to do with getting the boot in as part of the class war. It is all politics.

    Here is a question I’d love to ask Brendan Barber or Derek Simpson or any of those: would they ever campaign against million pound bonuses for its members?

    Also, their big assumption is that the market has plenty of people perfectly able to become Investment Bankers for a bonus-free (say) £45k. Are they out there? What has stopped a bank hiring such cheap, competent people? There is an opportunity if there really are such people out there.

  5. All this propaganda froth against banking is driving me nuts. It’s a distraction from the mess the FSA turned a blind eye to and the vast gobs of debt the taxpayer will have to find as a result because the Government couldn’t let bad businesses suffer for their own mistakes.

    There was a perfectly reasonable compensation scheme in place and the Government blinked.

    Barclays’ begging bowl was filled with private money not taxpayers. If they could do it why couldn’t the rest, then there would be no (pretend) issues over bank pay and perks.

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