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EDITOR’S TAKE: There is nothing wrong with knowing who got what at Merrill

Following a ruling yesterday by a New York state judge, Merrill Lynch will probably be obliged to make public the names of the 200 of its staff who received the highest bonuses last year.

Needless to say, Merrill didn’t choose this. Bank of America argued strongly that grave and irreparable harm would ensue if the names became public.

With some staff at AIG allegedly receiving death threats over the level of bonuses they received, there may be negative security implications to publicizing Merrill names.

However, there are few other good reasons to maintain secrecy on bonus levels.

At department store John Lewis, which is emerging as a paragon among bonus payers, (admittedly much smaller) bonuses are public knowledge. Everyone receives a fixed portion of their salary. And everyone has a good idea what each other got.

Bringing bonus transparency to banks would do wonders for both the probity of compensation systems and for the culture.

If everyone knew what the person next to them were paid there would be greater emphasis on paying fairly on a risk-adjusted basis. There would also be less in the way of posturing among individuals determined to create the impression that their smallish bonus was actually large.

When it comes to bonuses, compulsory transparency may be the one thing lawmakers could be usefully impose. The New York state judge may not know it, but he’s onto something.

Comments (19)

  1. You can’t actually be serious. You mentioned the death threats etc – just think, in this environment with unemployment going through the roof, how vulnerable is anyone with a 6 figure bonus going to be? Especially when the masses are completely oblivious to how and why they deserve that money.

    And if everyone in a bank knew exactly what colleagues got paid, it would lead to mass disgruntlement, a culture of everyone trying to act the same to maximize their bonus doing the same strategies which would backfire etc… a bonus is nothing more than an indication of how much they want to keep you, there’s no reason for it to be purely meritocratic and pay people more than you need to to keep them happy…

  2. If I had received a very fat bonus this year, I would be proud to be named and rub it in the mob’s faces!! Losers!!

  3. RBS Banker,

    but you didnt recieve a fat bonus did you? in fact i would guess that you didnt because you are now a public service tool working in the new age public bank!

    So for you my impetuous former equal, it will be others rubbing it in your face and calling you loser.

    Henry can i get an amen?!

  4. Henry, the initial part of your point makes perfect sense, when you say there is no need for a purely meritocratic bonus system however, thats partially nonsense. Banks shouldn’t be run like football clubs, but even in football clubs, bonuses are paid for winning a crucial match or a tournament (evenly split between the team members). As an indication of how much a particular member of staff is valued, give them an indicative pay rise.
    RBS banker, your just an attention seeker, but I’m sure you’re not on the list of high bonus earners at RBS. Even you’re ex-boss is battling hard to hold on to his pension.

  5. Henry – that is the most useful thing you’ve said on this site – agreed.

    And you’re next Reply
  6. Henry – that is the most useful thing you’ve said on this site. Agreed.

    And you’re next Reply
  7. agree with henry
    the same with every firm – a bank will want to pay as little for your services as possible to keep you. If i found out xyz was being paid way more than me i’d not be happy.
    right now – trying to discuss numbers with colleagues is a sackable offence for that precise reason. Half the bank would start to complain, eventually bans would be forces to pay everyone the same bonus, more likely raising costs.
    Making bonuses public knowledge is ludricous. there have been death threats already for god’s sake!

  8. Niv

    your comments just meander around as usual, no tangible contribution again.

    “As an indication of how much a particular member of staff is valued, give them an indicative pay rise”
    Indicative? i.e. tell them they’d get a payrise of 40% and not give it as it’s just indicative??? huh???

    “RBS banker, your just an attention seeker, but I’m sure you’re not on the list of high bonus earners at RBS. Even you’re ex-boss is battling hard to hold on to his pension”
    he never said he was on the “high bonus earner “list”” at RBS – he used the word “if” he earnt such and such.
    His boss isn’t fighting hard to keep his pension. It’s his – perfectly legal now. He might get sued by cherie blair but his pension is already in payment – there is no way to take it back.

  9. All this just exposes the lie that banking is a true meritocracy. Really of course, bonuses in banking reflect short term opportunism, dodgy backhanders, and internal politics.

    And we don’t want that sort of information to become public, do we ?

  10. I think transparency is the best thing that can come out of this crisis. Bankers who feel they deserve good pay (and some but not all do) should not be afraid of this becoming public info. Too often people making the same P&L for a bank are paid very differently just because one came from a big name and was expensive when he came. This lack of transparency makes others outside our industry think it is all cronyism and rewarding the boss’ mates (even when they fail). I agree there is a security concern, but maybe the best way to deal with a lynch mob is to use the criminal law properly and some security guards outside banks.

  11. A lot of traders miss the point. Pay is not about meritocracy but about market value. A bank wants to earn the most revenue for the least cost. A traders mobility / monkey value of the seat is what will drive his pay and so the differntial in payout ratios will be huge. If a hedge fund that pays 15% wants the top four earners on a desk ,then they will have to be paid comparitively. If they don’t , then how much does it cost to get another average trader? (remember its not hard to have a record year as a trader in this environmwent – monkeys are making 5x what they used to). The problem this creates is people making 3 times what the guy sitting next to them may earn 8 times the bonus. I do not know many traders (smart ones as well) that can stomache this “bell curve” effect. Transparancy will ruin trading desks

  12. ponterotto,

    I think I rattled your cage a while ago, my apologies. The other day it was ‘first principles’, today its ‘indicative’. Frankly your logical reasoning is sub-standard. Mr X was given a ‘40%’ payrise… that is an INDICATION of how much Mr X is valued, given his contribution to the business. If his payrise doesn’t genuinely reflect is contribution to the business and his value, it is not indicative. In other words, a compensation or remuneration system based on merit. You have completely miscomprehended my use of the word ‘INDICATIVE’, yet it is the basis of your attack. Sheer ignorance

  13. Maybe its a sneaky way to generate jobs. People with large bonus’s will now pay for personal security.

  14. I think the opposition to transparency is from people who are genuinely overpaid. That is not a surprise. But if regulators and governments are going to clamp down on pay in general, it is much easier to defend our pay levels if the numbers for people producing similar P&L with similar risk are at least comparable. We are generally fighting a losing battle, but those who stubbornly refuse to accept transparency may find they will have to compromise on the actual pay level instead, unless they remain the lucky ones.

  15. Speaking as one of the many who got so little that i could have spent it in the M and S Foodhall on the way home..I say death to those who got a real bonus….and hopefully their bous payout could be re allocated to those in dire need..like me

  16. greeneye, notwithstanding your envy, I still believe more transparency on bonuses is a good thing. Maybe someone who sees your bonus may sympatise enough to pay for your M&S food purchase for that day.

  17. Things have gone out of hands.. Lets face the fact, the last ten years have been a bit of a robbery..and most bankers are cowards. During good times everyone boasted, now when we finally got a backlash and a sligth awakening of common sense, we are affraid of transparancy and public retribution. Everyone has to pay a price!

    I always wanted to be an entrepreneur and gave it ago, after realising how unsound it was relative to trading where there is a put option on failure there was no incentives… I would be more than happy to welcome market conditions and regulations that favours new business creation but no sign that we there yet. At least successful entrepreneurs can be pride and transparent about there individual performances!

  18. Giles.Percy bang on mate. Why should anyone fear transparency of bonuses if they are truly a refelection of the revenue you as an individual have generated. If my colleague sitting next to me has performed better then i would them to have a bigger bonus, simple. If the industry is as truly meritocratic as it likes to portray then declared bonuses should be no issue. Indeed if anything this would provide incentive for one to work harder as they can clearly see the tangible results that can be acheived through dedication. No more shady hush hush back scratching nonsense please.

  19. Bankers shouldnt get these bonuses… the cash should go to the shareholders….the same shareholders that are now paying for their greed and folly.

    Carmen San Carlos Reply

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