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Is it morally wrong for banks to pay big bonuses this year?

The government is looking to curb them as soon as possible, while banks want to pay the performers who bring in the profits, but is it morally wrong to pay big bonuses so soon after being bailed out from the brink of disaster?

Alistair Darling seems intent on ensuring bonus payouts are scaled back before the FSA proposals come into affect in 2010, and Lord Myners is meeting with international investment banks this week to try and convince them to toe the line.

But while onerous regulation is one way of clamping down on bonuses, both men are hoping that banks will feel morally compelled to scale back payments this year anyway.

“Yes, they can wait for legislation if they want. But I really think that some of them should show some common sense. They shouldn’t be paying this amount out in extravagant bonuses,” said Darling last week at the Labour Party conference.

Meanwhile, in an interview with Financial News, Myners said: “There is no denying that issues around bonuses in particular are a source of considerable national anger and, whilst our banks continue to draw upon significant state support, either through funding or the implicit guarantee that banks have, then it seems odd for companies to be paying out very substantial bonuses or substantial dividends.”

So, the message is fairly clear – you can pay big bonuses this year, but should you? Bonuses have always been a part and parcel of banks’ compensation practices, but is it morally correct that they’re paid out in 2010?

Your thoughts please…

Comments (12)

  1. Does it matter what Dozy darling thinks? This socially and financially corrupt government is on its last legs. My concern is that Cameron may be too intent on becoming a Tony Blair reversal figure (i.e. Blue to washed out Red) and not recognise the serious issues that gratuitous regulation will cause.

  2. The bank I’m at has not taken any government money and is having a great year so far, so I fully expect to be paid in proportion to the profits of myself, my desk and the bank this year. Where do morals come into it?

    I’m really pissed off at the whole anti-bonus screaming. The size of bonuses had zero to do with the crisis – the misalignment between term of risk and term of bonus payments did, so yes by all means defer the bonuses of people trading 30-year instruments, but what have high frequency traders got to do with any of that?

    If ‘bonus culture’ is a bad thing why don’t we fight the ‘salary culture’ as well? What about footballers and pop stars’ salaries, for example?

  3. There is a diffference between taking risk and maing money on your own/the organizations own money, and doing it on highly leveraged OPIUM – other people’s money – that multiplies profits and risks. Trading desks and traders have a very narrow focus. They miss the big picture -leave alone issues such as systemic risk.
    I don’t think that Volker/King’s suggestions for reintroduction of a neo Glass Steagal will work either, as leverage comes from offshore sources too. The price of leverage has to rise to prevent the easy profit/easy money – and risk be damned route.

  4. Is this a joke? I don’t know where you live, but clearly it is on another planet. Forget the bonus. Do you not realize that millions of people are out of work because of the transgressions of Wall Street? Obviously, you have no family or friends that have been impacted by the recession or you would not make such an idiot comment. Arrogance like this make it understandable why Main Street hates Wall Street. Clearly, this is not your problem. Take your bonus. I dare you to donate 1 even 5% for some more deserving than yourself.

  5. What is morally right today? Have gun, go west !

  6. who gives 5hit! I go where the money goes. If this Government does not like it, it can go take a jump, preferably into shark infested water.

  7. Sorry Andrea but why did main street keep buying overinflated houses?

  8. If the bonuses are paid out of “corruption” and not based on a firm’s progress and earnings, then the banks are hurting themselves and will most likely demand another bailout in the future. However, if the bailout has been re-paid by the bank to the government (in terms of making the minimum payment), then the banks can give out as many bonuses as they wish.

  9. What is extravagant for some, is fair to others and what is fair to some is unfair to others… and so on. the root of the problem is not the “colossal” bonuses nor practices but regulations that lawmakers are unable to pass for so many reasons. Those are the drawbacks of free economies: whether they are free or not. It’s like you’re telling someone it’s morally wrong to drive above 80 mph on an open straight highway not monitored by speed radars and the car goes from 0 to 62 mph in less than 4 sec. Regulators should follow closely market trends and practices and try to be as much as innovative as market players.

  10. Actually, it is still morally wrong to pay big bonuses this year as many financial institutions are still recovering from the financial losses erupted in 2008.
    Only because a small group or unit generates its most profit for their financial institution does not legitimatize their bonuses.
    Most of these people are not even aware of the impacts their actions have on global systems. What they only see is their annual performance based on their trading activities, which is still biased. Traders that performed poorly still claim for their bonus pay due to the contractual agreements, eg. the Commerzbank trader case in Germany.
    To me personally, people who are only out for the money should be banned from the banking sector. We need people, who can truly identify themselves with the financial sector, charismatic, and have the fricking balls to acknowledge their mistakes.
    Everyone makes mistake, but banking people should also be responsible for their failures. If one’s work-related contribution has a strong impact on the bust, just be responsible for that. Therefore, one will have no rights for the bonus. Period. Otherwise, bankers are nothing but a bunch of pathetic money addicts.

  11. Now I know who the brainy one is, I?ll keep looknig for your posts.

  12. To be honest, if you have worked for it then why not? to do things out of political correctness is not what made great countries or businesses.

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