For all the economic talk of an upturn in the economy, most of which means nothing to me, it isn’t until you start hearing down to earth stories of real, actual, growth that you can start to believe that we are moving out of recession. For instance, at a BusinessBuzz networking meeting this morning, I was talking to someone from an IT company who said that one of their customers had just ordered a bunch of new workstations from them, not to upgrade what their staff were using but because they were recruiting. Good news indeed.
Bloomberg reported the other day that Judges had tired of hearing claims over bankers’ bonuses and provided a brief summary of recent high profile litigation. Bankers are said to have been turning to the courts and tribunals to challenge bonus decisions as job cuts start to bite. It’s not a particularly helpful article because it doesn’t bring out the distinction between contractual and discretionary bonuses.
It didn’t meet with the same critical acclaim last week that the film of nearly the same name – The King’s Speech – did a few months ago. No one seemed very impressed by it, little detail was provided and what we have been promised has been mooted already. The business lobby were underwhelmed by the lack of specifics. The Government’s public discomfort continued as they managed to please no one. Business didn’t like the lack of detail and everyone else seemed underwhelmed. Ed Miliband had a good day, saying,
“No change, no hope – that is the real message of this Queen’s Speech.“
I’ve been maintaining radio silence for too long – sorry about that but the day job got in the way – and thought it was about time I put up another post. Part of the problem is that there has been a lot of stuff to write about and knowing where to start. However, our darling Chancellor, or should that be Mr Darling, Chancellor – has made my task a little easier today following his Pre-Budget Report, particularly with his tax on bankers’ bonuses.
The FT is reporting today that the FSA has finally produced its remuneration code on how bankers should be paid. I have only seen the headlines and brief summary of the proposals, but it seems that the FSA has shied away from being too prescriptive for fear of driving bankers abroad to less tightly regulated markets. Expect a deluge of criticism to fall on top of the FSA, whose days are numbered if the Tories return to power at the next election.
Unusually for an August the topic of bonuses is back in the news pages. This isn’t surprising given that the recession has been firmly blamed on reckless bankers supposedly taking unnecessary risks to generate huge returns that almost led the banking system to collapse last autumn. Both Barclays and HSBC have announced huge profits for the last six months. In Barclays case it was £3bn up 8% on the equivalent period last year, and the comparable figure for HSBC was £2.8bn. Both banks also revealed that they were making massive provision for bad debts. Bob Diamond, the head of Barclays Capital (BarCap) was on the front page of The Independent on Tuesday, where it was reported that he had received a remuneration package in excess of $50mn at the height of the boom. The Independent also reported that the “average net income generated per member of staff” at BarCap had increased from £134,000 to £193,000 per member of staff in the last six months. The FT also reports today that a US hedge fund group called Och-Ziff, based in the US made a loss of $88.3mn because of a 74% increase in bonuses paid to its top traders. At the Dale Langley & Co website we recently posted on the steps the FSA are taking to try and restrict remuneration packages – click here to visit. The government, the FSA and the public are all determined to stick the boot in.
The recent indignity suffered by Home Secretary Jacqui Smith over her husband’s viewing of two “adult” films, which she then submitted as part of her parliamentary expenses claim got me thinking again about the slightly older furore over Sir Fred Goodwin and his humungus pension, and the ongoing hysteria over bankers’ bonuses. I posted a couple of weeks ago on why I thought it unlikely that Harriet Harman’s threat to take government action to recover Sir Fred’s pension would be successful. In the meantime Congress in the USA has got itself worked up into a lather over bankers’ bonuses and is considering a 90% rate of tax on all executives (from those institutions receiving state bail outs, particularly AIG) receiving compensation packages in excess of $250,000.
I normally expect to get a lot of enquiries about low or non-payment of bonuses around this time of year. However, it is not normal for the subject of bankers’ bonuses to be front page news or for all three party leaders to jump on the bandwagon and criticise the level of bonus payments. Of course, we’re not living in normal times at the moment and bankers are going to be fair game for the media and politicians.
In normal times (and heaven knows we are not in them at the moment), people only really get interested in bonuses come January and February each year. But because of the extraordinary events of the last week or so (I’m thinking particularly of the bail-outs of some of our biggest banks) there has been speculation over what it will mean for next year’s bonus round. The speculation has been fuelled by comments from the Chancellor of the Exchequer that large bonus payments will not be tolerated at those banks that have been part-nationalised. The wider media, always in search of an easy scapegoat, has leapt at the chance to have a go on the issue. In turn that has led some lawyers to discuss whether bonuses can be regulated or reduced.