50 views
Social Justice > Published by Duncan Exley, February 8th 2011 at 4:29 pm

Countering the myths that bankers will leave if bonuses are reduced

Print Friendly

Duncan Exley is the campaign director for One Society

Greedy-bankersWhen George Osborne today announced an increase in the bank levy, he also conceded he had not yet struck a deal on limiting bankers’ bonuses, nine months after the coalition agreement promised:

“…robust action to tackle unacceptable bonuses in the financial services.”

There is widespread anger because bonuses are out of proportion with average incomes, reasonable reward, or the perceived social usefulness of banks.

Despite this, and the person-hours spent exploring options, we still do not have even a weak response to astronomical bonuses. This suggests we need to institutionalise some checks and balances, to avoid an annual ritual of calling for a steam hammer to crack a nutty level of pay and bonuses.

One precondition for this would be for the government, opposition and commentators to counter the “big-bonuses-are-necessary” myths with evidence. One common myth is that bankers would leave if bonuses were reduced. However, recent research by eFinancial Careers confirmed that:

“The fact the payments are higher in London pours cold water on the claim that bankers would leave Britain for jobs overseas if they were not paid big bonuses.”

i.e bonuses can take quite a cut before bankers are tempted to move elsewhere. Where bonuses have been restricted, some in banking admitted that this caused:

“…no problems recruiting a bumper crop of talent.”

The other big  myth, that bonuses improve performance, is contradicted by academic psychological research commissioned by the Federal Reserve Bank of Boston:

“…for tasks that include a cognitive component, there seems to be a level of incentive beyond which further increases can have detrimental effects on performance.”

This suggests that raising low pay may be beneficial.

Beside myth-busting, the composition of the groups who scrutinise and decide high pay and bonuses should be broadened. This could include:

• Mandating the inclusion of investor and employee representatives in remuneration committees, and instituting equivalent structures to scrutinise and set bonus strategy;

• Requiring the highest bonuses to be revealed in annual reports, alongside the ratio between an organisation’s top and bottom remuneration rates; and

• Requiring investors to report how they have voted at AGMs, as advocated by Fair Pensions and others. In the case of banks, major shareholders include our pension funds and our government: shouldn’t we be told how they are using the votes they cast on our behalf?

The current BIS review, ‘A Long-Term Focus for Corporate Britain’, to which One Society has responded, has begun to ask whether broadening the group of those who scrutinise and decide remuneration rates would be helpful, though some lobby groups have warned against such moves, fearing results that appear similar to the mythical spectres discussed above.

  • http://twitter.com/matt_zarbcousin/status/35013281877856256 Matthew Zarb-Cousin

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced: http://bit.ly/hYotla by @One_Society's Duncan Exley

  • http://twitter.com/ronisgreat/status/35014743932542978 ronisgreat

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced: http://bit.ly/hYotla by @One_Society's Duncan Exley

  • http://twitter.com/one_society/status/35015987615117312 One Society campaign

    Our blog on @leftfootfwd: 'Countering the myth that bankers will leave if bonuses are reduced'. http://bit.ly/hYotla

  • Liz McShane

    Just on a practical level, I think a lot of foreign nationals who are bankers like living in London compared to other cities because of the lifestyle & variety etc. that the capital offers and would be very loathe to re-locate if it meant that their bonuses were intact.

  • http://twitter.com/fairpensions/status/35019389883392000 FairPensions

    Will bankers leave if #bonuses are slashed? Some myth-busting from @One_Society on @leftfootfwd http://bit.ly/fRrrBo @equalitytrust

  • http://twitter.com/igav/status/35020174520356864 Gavin Duff

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced: http://bit.ly/hYotla by @One_Society's Duncan Exley

  • http://twitter.com/one_society/status/35020473439879168 One Society campaign

    Great to have our blog up on Left Foot Forward in which Duncan Exley counters the myth that our bankers will flee… http://fb.me/FhPHYRf4

  • http://twitter.com/downinjamaica/status/35022218194845696 downinjamaica

    RT @One_Society: Our blog on @leftfootfwd: 'Countering the myth that bankers will leave if bonuses are reduced'. http://bit.ly/hYotla

  • Richard

    We should also be countering the myth that the banks will leave if we regulate them too much for their liking. The banks need reminding that they would no longer be in business today were it not for the security of UK Plc’s balance sheet. The idea that megabanks would move to other countries is simply ludicrous. They need a large public balance sheet to back them up, otherwise they will not be able to borrow anywhere near their current amounts. There is no way that a JP Morgan Chase or a Barclays could consider moving to places like Grand Cayman, the Bahamas, or San Marino as off-shore financial centers.

  • http://twitter.com/brutus_teabags/status/35026642262818816 Brutus Teabags

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced: http://bit.ly/hYotla by @One_Society's Duncan Exley

  • http://twitter.com/janewatkinson/status/35033538650841088 Jane Watkinson

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced http://bit.ly/gz6ksL <<< For some sense.

  • http://twitter.com/andrewtindall/status/35033613984604161 Andrew Tindall

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced: http://bit.ly/hYotla by @One_Society's Duncan Exley

  • http://twitter.com/gertiepink/status/35034752440479744 Rachel

    Countering the myths that bankers will leave if bonuses are reduced | Left Foot Forward http://goo.gl/1LGzm

  • http://twitter.com/gertiepink/status/35035430864961536 Rachel

    RT @JaneWatkinson: RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced http://bit.ly/gz6ksL <<< …

  • http://twitter.com/robinhood/status/35040321863680000 Robin Hood

    RT @Gertiepink: Countering the myths that bankers will leave if bonuses are reduced | Left Foot Forward http://goo.gl/1LGzm

  • http://twitter.com/bilbobaggins2k/status/35041932304453632 Kathrine Stokes

    RT @Gertiepink: Countering the myths that bankers will leave if bonuses are reduced | Left Foot Forward http://goo.gl/1LGzm

  • http://twitter.com/mdoness/status/35042510720077824 glynis powell

    RT @Gertiepink: Countering the myths that bankers will leave if bonuses are reduced | Left Foot Forward http://goo.gl/1LGzm

  • http://twitter.com/olliestoney/status/35043116088180736 Oliver Stoney

    RT @Gertiepink: Countering the myths that bankers will leave if bonuses are reduced | Left Foot Forward http://goo.gl/1LGzm

  • http://twitter.com/itsmotherswork/status/35049667158872065 Itsmotherswork

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced http://bit.ly/hYotla

  • http://twitter.com/gailcartmail/status/35049668677206016 Gail Cartmail

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced http://bit.ly/hYotla

  • http://twitter.com/andyfenlon/status/35049692526018561 Andrew Fenlon

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced http://bit.ly/hYotla

  • http://twitter.com/northerntuc/status/35050145947062272 Northern TUC

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced: http://bit.ly/hYotla by @One_Society's Duncan Exley

  • http://twitter.com/jodatu/status/35058165292863488 John Turner

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced http://bit.ly/hYotla

  • http://twitter.com/unisoneastmids/status/35061057114341376 UNISON East Midlands

    Countering the myths that bankers will leave if bonuses are reduced http://is.gd/7mj6SG

  • http://twitter.com/hannah_2809/status/35061231400263680 Hannah Lownsbrough

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced http://bit.ly/hYotla

  • http://twitter.com/geecologist/status/35062028338991104 Tom Allen

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced http://bit.ly/hYotla

  • http://twitter.com/444blackcat/status/35064220135600128 johntucker

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced: http://bit.ly/hYotla by @One_Society's Duncan Exley

  • http://twitter.com/tompowdrill/status/35064480928894976 tompowdrill

    RT @One_Society: Our blog on @leftfootfwd: 'Countering the myth that bankers will leave if bonuses are reduced'. http://bit.ly/hYotla

  • http://twitter.com/ldtuc/status/35069016338993152 L DTUC

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced: http://bit.ly/hYotla by @One_Society's Duncan Exley

  • http://twitter.com/simpkins83/status/35070992594247680 simpkins83

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced http://bit.ly/hYotla

  • http://twitter.com/double_karma/status/35076183213359104 Double.Karma

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced http://bit.ly/hYotla

  • http://twitter.com/nickcdx/status/35078671408570368 Nick Beddow

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced http://bit.ly/hYotla

  • http://twitter.com/colinjacksn/status/35088411865907200 Colin Jackson

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced http://bit.ly/hYotla

  • http://twitter.com/rctunison/status/35108099119386624 RCT UNISON

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced http://bit.ly/hYotla

  • http://twitter.com/myinfamy/status/35108527051644928 Daniel Pitt

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced http://bit.ly/hYotla

  • Mr. Sensible

    The banks need to understand that this sort of thing won’t wash.

  • http://www.leftfootforward.org/2011/02/tory-links-to-city-exposed/ Tory dependence on City money should come as no surprise | Left Foot Forward

    [...] Osborne and Cameron to the City, from the limp banking levy to their failure to take action on bonuses, coupled with the revelation last week that, in opposition, they were encouraging the Labour [...]

  • http://twitter.com/britainologist/status/36678633825247232 britainologist

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced http://bit.ly/gz6ksL

  • http://janespoliticalramblings.wordpress.com/2011/02/28/uk-uncut-and-unmasking-the-banks-informal-power-structures/ UK Uncut and unmasking the banks’ informal power structures…. « My Political Ramblings

    [...] We have to fight the nonsensical view that the bankers will just get up and go if we tax them more (see here for a really good blog dispelling that myth); this is a mere attempt to divert attention from the [...]

  • http://www.leftfootforward.org/2011/12/bankers-bonuses-are-contributing-to-the-new-credit-crunch/ How bankers’ bonuses are contributing to the new credit crunch | Left Foot Forward

    [...] Countering the myths that bankers will leave if bonuses are reduced – Duncan Exley, February 9th [...]