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August 23, 2016

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gastro george

So the original motivation was profit-sharing, so why not call it that and flatten out payments, so that the benefit is group-wide rather than individual?

chris

@ Gastro - I suspect there was an element of gift exchange - reward for doing a good job. I can't say how egalitarian or not bonuses were back in the day.

Phil

Still boggling at the idea of £100K being at the low end of, well, anything - once you get over £150K you're literally in the top 1%. (I'm in the top 20%, as it goes, & don't consider myself at all hard done-by, but it took me a while to get here.)

But I've said this before, elsewhere:
http://crookedtimber.org/2015/02/27/how-to-keep-your-dignity-at-bonus-time/#comment-615398

BCFG

Yes £100k for what? What contribution to society? Actually while we are on the subject, why does anyone in the whole wide world need more than £100k a year to live on? Why don't we pose that question now and again!

All the reasons for bonuses could easily apply to any industry, the reason the bonuses are so high in the finance industry is surely because so much money comes through the finance sector and they cream off as much as they can! They have so much they don't know what to do with it, other than enrich themselves!

chris

@ Phil, BCFG - you're right of course. I was describing the world as it is, not as it should be. The av. salary at Woodford's firm is over £300k.

James Webber

Back around 2000 the bank I was working at in the City imposed a 10-15 percent cut in salaries in response to weak trading conditions. (I think this is illegal under UK labour law, but let that pass). When Christmas came around, with the salary cuts still in place, bonuses were paid as usual! It's hard-wired into the system and would be almost impossible to eradicate.

Um

Um, "Paying a recent hire a bonus is a way of compensating him for having a relatively low initial salary" should really read "him or her", no? Or at least if not, you should address why not. Sorry, watching piece about unequal m/f pay in Newsnight as I type

jono

"It would be a brave large bank that scrapped bonuses in the hope of crowding in intrinsic motivations. Some people enter banking precisely because they are motivated only by cash – maybe not many, but enough to do damage. They’d get the hump if bonuses were scrapped"

Scrapping bonuses isn't going to change total comp. We know this from seeing how bank salaries have adjusted to recent bonus regulation.

The point about bonuses is that it allows employers to reward/punish productivity in a far more granular way than a salary scheme ever can. It's a massively useful tool for management and, if they could, I suspect most employers would wish to be able to pay what is essentially "discretionary salary". Equally, a certain type of employee is attracted to it because they believe they will be an outlier performer and don't want to subsidise others.

An Alien Visitor

Yes from an employers point of view the bonus scheme is a bit like the slave masters whip or the old slave practice of starving unruly slaves to death. Great for the slave master in the short term but crap for everybody in the long term!

It is a great example of where managerialism could lead if left to its own devices.

Where I work it is noticeable that the biggest barriers to home working is the attitude of a certain level of management. These people are dinosaurs who need dragging into modernity. And they often accuse the unions of this! Go figure!

Bob

The government needs to ban the banks from activities not serving the public purpose. Bonuses is a distraction.

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