Monday, February 16, 2009

Government bans executive bank bonuses.

I said yesterday that I thought the fact that Obama had moved to curb the culture of giving bankers bonuses would probably lead Brown to do the same. Well, he has not even waited a day before he has done so.

The government yesterday publicly hardened its position on bank executive bonuses saying it will be "very, very robust" in clamping down on bonuses for 2008 in banks in which it holds shares. It will only allow modest payments for clerks earning around £20,000 a year.

It came as David Cameron said he would cap all 2008 bonuses at £2,000 for staff in banks owned or partly owned by the government. He also said the government should be willing to sue any bank executive who insisted their contract entitled them to a large bonus for the year.

The government shift, after intense private disagreements within the cabinet, came amidst reports that Lloyds plans to pay out up to £120m in bonuses for 2008 to thousands of staff. Its chief executive, Eric Daniels, came under intense pressure after Friday's shock profits warning caused by the HBOS banking group it rescued four weeks ago. The bank insisted that bonuses were typically £1,000 or less.

Daniels and other members of the Lloyds board have been banned from taking bonuses after receiving £17bn of taxpayers' funds to bolster the bank but Daniels has always insisted that staff should be allowed to receive their bonuses, which are typically around 10% of their salary.

The government's bonus clampdown comes as polls suggest Labour may be losing support to the Conservatives and the Liberal Democrats over the issue.

I don't think that there is anyone who would object to generally hard working banking staff collecting some 10% of their income in bonuses, the main objection most of us had was with the chairmen - those already collecting seven figure salaries - rewarding themselves with huge bonuses from banks which are being saved from extinction by the public purse.

I am with McNulty on this one:

The employment minister, Tony McNulty, said staff on lower salaries should not forgo their bonuses, but the issue was totally different for senior executives. "I would draw the line between senior managers, board members, executives, those responsible for the business model and strategy that got them into the mess, they shouldn't get a penny," he said.

A Lloyds spokesman said: "We are a retail and commercial bank where most colleagues earn approximately £17,000. We have been stretching performance targets and if they are met we believe it is right that colleagues receive some financial recognition. In most cases this means an annual bonus of £1,000 or less."

People earning £17,000 a year were, of course, not the people who responsible for the strategy which led to this mess and are not the people most of us are talking about when we attack this bonus culture.

And I also note that David Cameron, that great political opportunist, has now stated that he thinks the merger between Lloyd's and HBOS was a mistake; despite the fact that he voted for it a mere four months ago.

Indeed, the Tories are cynically using this crisis, decrying now a merger which the entire shadow cabinet previously supported.

Labour are losing support on this issue to the Tories but, if one looks at the Tories voting record, there is no proof that they would have done anything different at all.

The Tories are heading for power simply on the grounds that they weren't in charge when lightening struck. And, despite the fact that they voted for everything which they now decry.

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