Bankers’ bonuses

8 February 2009

Are some bankers tone-deaf or do they just want to be hated? Sometimes you wonder. There is nothing wrong with people being rewarded for success and doing a good job, and it may be the case that those receiving the bonuses deserve them. After all, not every section within the bank failed. However, it is obscene and unethical for the bank’s top brass to receive huge bonuses when the bank as a private enterprise has failed and, as a consequence, has been nationalized (70% state-owned) as is the case with RBS. They are all employees of the same bank: you share the profit in good times, but you have to share the pain in bad times. The top managers may be entitled by contract to their bonuses. But can they not decide, out of their own volition, to renounce the bonuses? Perhaps they are contractually obliged to receive the bonuses even if they don’t want them.

According to the apologists for bankers’ bonuses, “talent” will leave the UK banking sector without “appropriate rewards”. Most people, at this point, would be shouting “good riddance!” What “talent” are we talking about? How many of the so-called top bankers receiving millions in bonuses understand mathematical, economic, psychological theories in depth when making their decisions? Could they actually come up with methodologically sound econometrics? How many of them actually have deep understanding of statistics? Do they have solid methodology in assessing risk, where human psychological elements are invovled? Some of them undoubtedly do, and must be horrified that their decision-making and risk-assessment results have led to the current calamity. It seems, however, that most of decision-making “talent” in the City is based on gut, greed and pop-psychology with only short-term results in sight. Their talent for greed and destruction seems boundless. No humility or ethics displayed but only hubris: bankers aren’t going to be popular for a while.