Some very good points made . I think we would all agree nobody should be grossly overpaid for failure. where the line appears to be is how much should success be rewarded. I feel to not reward individuals just because of past errors by others is unfair.I have to agree with Tucson, if the employees make the company more profitable or reduce the loss it would otherwise have made I have no problem with rewarding them accordingly. This appears to be the stance of the Barclays shareholders.
Moyes fouls up and walks away with 5 mill. The next guy who comes in will also get big money for winning or failing. Why? Because they can dictate the terms as there are probably less than a dozen people in the footballing world that have the skills of Fergie and this is in a game where hardly anybody makes a decent return. In the case of RBS if you can employ a top team that moves the share price from £3 to £6 ps (or in truth 30p to 60p) then you have the value of the company increasing by £18794million! My view as a capatilist shareholder is that if they do that and provided the bonus is tied to the SP and the SP stays at or above £6 then they can share £794 million between themselves and good luck. The decision for setting reward and remuneration lies with the board and the shareholders. At the moment a major shareholder is us in the guise of the Government and the Government are playing politics not morals.
Interesting debate, about time, board has been pretty quiet of late. Hope everyone is well...!!!
May I just add here, can see both points of view. It does seem grossly unfair, especially in the banking sector, certain directors are paid ludicrous amounts of money as compared to the average earner and then fail in their task of risk assessment which is really the true responsibility of the executive board. Our capitalist system has an anomaly and that is based on the fact that banking enterprises who haven't performed don't go bankrupt as they would in a true free market system. I think this is where people in general have a huge issue with bonuses and pay. Not only do the directors get paid as they do but also walk away pretty much scott free and then walk into other financial positions.
I really do feel one can draw similarities with the macro/micro side. The bottom line sales staff who work for banks/insurance etc get paid such a small basic salary with bonus schemes set up so they are incentivised to the max to sell the companies products. This by itself creates a real self interest, greed culture with less onus on giving best value to the end customer. Cannot really blame the staff as we all have bills to pay and families to feed but then as with the case of PPI for example, it has disastrous consequences. The same can be said for the top high earners, perhaps more so in financial services who again are incentivised by contract to be motivated by self interest.
The really difficult question is how to create an ethical culture where staff are motivated and rewarded to be their most productive without using our current system of incentivising to the point of creating such avarice.
Wasn't arguing that there is no difference between micro and macro , just that they are interdependent and that being the case the financial distance between the two should be a bit narrower . It has dramatically increased over the last few years , decade , with no good reason . Were not talking about middle management here , people being given a few perks or incentives to stay with a company , it's the vast amounts of money being paid to individuals for no apparent good reason .are these people making companies far more profitable than they have been in the past , don't think so . It comes across as greed and arrogance on behalf of management not only to their shareholders but the general public highlighted by the recent BARC's scenario. Can't remember the exact figures , something like a 32% drop in profits but a 10% increase in bonuses. Little wonder the shareholders were up in arms and yet they still passed it . If as you say it's just the market setting the price and I'm not sure that it is , then at the moment we seem to be seriously over bought in terms of top level remuneration .
Thanks for both of your posts. I am on my computer now so hopefully my post is easier to read. Tucson, I take your point about redundancies. They are never pleasant but sometimes necessary. I was FD at a company once and made myself redundant for the good of the company when I could have saved myself and sacrificed others.So I do have morals and ethics. Did it benefit the company, me taking a moralistic approach, probably not as it closed within 6 months. Jings, I worked for a small firm, so no, I was not generating 100x my salary. If I recall I was on a salary of around £25k being the key-man in around £300k of fee income . And you are right I could not have done it without the foot soldiers . However the basic economics of demand and supply was there were fewer of me in the market than them so I commanded a higher premium. Its the old addaige the doctor could be a bin man but the bin man could not be a doctor. I disagree,with your point on macro/micro, Jings. There is a big difference between micro and macro , maybe not in a communist society, but certainly in a capitalist one. If there were few differences we would not have the Richard Branson's etc. and we would all be programmed in to put the State before anyone else The market sets the rate of pay for labour , often on a global basis at the top. When the politicians, moralists and Cables of the world get involved it usually ends in tears.
To take your personal example , were you generating hundreds of times more profit than you were getting paid in salary and bonuses ? It's questionable whether anyone , in any industry does that and certainly not without the help of the " easily replaced cannon fodder " without them it doesn't really matter who's running the company , aint gonna make a profit . Strikes , not that I'm advocating them , would be the obvious example. Not sure how you can separate the macro from the micro to be honest . No man is an island etc . To be fair I'm not just addressing banks who to a large extent seem to have become the whipping boys in a general debate about bonuses and remuneration across the board . To my mind as the gap between rich and poor widens society as a whole becomes poorer ethically and morally and although you argue that there are no ethics or morals here do you really think businesses or society for that matter , could survive for any length of time without them .
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