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Bank chiefs told: Hand back your £143m in bonuses
Jonathan Prynn, Consumer Affairs Editor21 Jan 2009
PRESSURE is today growing on Britain's high street bank chiefs to hand back tens of millions of pounds of bonuses paid out as a reward for their "success".
MPs, consumer groups and shareholders said there was mounting anger at the vast scale of the performance-related payments pocketed by directors of the big five - now four - banks in recent years.
Analysis by the Evening Standard reveals that £143million in bonuses has been handed over to bank directors since 2003 - the year that concerns about "irresponsible lending" first began to be widely aired.
These are on top of base salaries, option payments and other perks such as final-salary pensions and are, in principle, awarded only if they have done their job particularly well. Bonus levels are set by committees of fellow bank directors.
Liberal Democrat Treasury spokesman Vince Cable said: "As a basic moral and philosophical position it has to be right that the bonuses are refunded. Whether it can be enforced practically is another matter."
Paul Kenny, general secretary of the GMB union, said: "The Government should use its various controlling stakes in the banks to commence legal action to get repayment of these bonuses ,which were paid under false pretences."
Eddie Weatherill, of the Independent Bank Advisory Service, said: "The banks have clearly made excess profits over the years and have dreamed up better and better schemes to pay themselves bigger and bigger bonuses until the bubble burst."
The biggest single beneficiary has been the head of Barclays Capital, Bob Diamond, who has been awarded £21.3million in bonuses since 2005.
In 2007 just 28 executive directors shared almost £35million of bonuses for their performance in a year when the first tremors of the financial earthquake were already being felt.
One leading City investor said the banks' current directors should be "sent packing" if they expected any bonuses for 2008.
The demands come after another traumatic two days for the banking industry with shares in Royal Bank of Scotland, Lloyds - now owner of HBOS - Barclays and to a lesser extent HSBC taking huge tumbles.
Since they peaked in the summer of 2007 more than £200billion has been wiped from the value of Britain's high street banks and two - RBS and Lloyds Banking Group - have had to be rescued with huge injections of government money.
The banks' accounts reveal that bonuses have mushroomed as gambles authorised by directors have became more serious.
In 2003 executive directors at RBS received bonuses of £4million, including £990,000 for chief executive Fred Goodwin. By 2007 this had more than doubled to £9.2million, including £2.86million for Sir Fred.
At HBOS the highest bonus in 2003 was the £737,000 paid to chief executive James Crosby, now a government adviser. But in 2007 director Peter Cummings, who was responsible for much of the high-risk lending that helped land the bank in trouble, received almost £1.8million.
There are few precedents for bonuses being handed back but Swiss bank UBS has introduced the concept of a "malus" payment - a negative bonus - as a way of clawing back money from underachievers.
Under City guidelines, drawn up by the Association of British Insurers, company remuneration committees are entitled to ask for money back "if the performance achievements are subsequently found to have been significantly misstated".
A spokeswoman for the British Bankers' Association said: "We have always said that remuneration should be looked at by the remuneration committees of the banks and if shareholders are unhappy about that they should take it up at the AGM."
Barclays said Bob Diamond should not have to hand back his most recent bonus.
A spokesman said: "Barclays' strong performance in 2007 and previous years is a matter of public record. Remuneration at Barclays is based on performance."
A Lloyds TSB spokesman said: "Lloyds TSB has delivered significant profits generation for its shareholders for a sustained period of time.
"The Group has stretching performance targets and bonuses are only paid when they are met."
An HBOS spokesman said: "The HBOS executive remuneration scheme included a number of stretching performance targets that had to be met before bonuses were paid. The company's guidelines are very much in line with those of the ABI."
An HSBC spokesman said: "Executive bonuses are determined by our independent remuneration committee based on a range of performance measures.".
RBS declined to comment.
Reader views (42)
It is interesting to read the comments from the bank based contributors. Their comments confirm to me why the banks are in such a mess. At the very least you should hang your heads in shame & admit that your greed is the reason why the future generation of our country will not get the new hospitals,schools & roads they need. At the very least directors should pay thier bonus back & go to jail along with the rating agencies friends, as I believe is the law for robbers.
- Richard of Chesterfield, Chesterfield England, 31/01/2009 23:51
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The Uk's nearly out of businesses and money because of these over paid bankers. Sure they should pay it back and the shareholders, with interest.
- Jon, seaford, UK., 26/01/2009 15:45
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If a cashier were to take money from the till and put it on a horse he would be prosecuted. This lot gambled with other people's money lost and said we still deserve our bonuses. It is time to prosecute people who treated other people's money as if it were their own in a no lose bet.
- E Edwards, Romford England, 22/01/2009 10:38
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Having seen the sebtence passed on the men responsable for the milk scandal in China repayment of unearned bonuses seems the very least we should expect.Ludicrous knighthoods and honours should be withdrawn immediately.
- P.Doff, madrid spain, 22/01/2009 08:02
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When is the Govt going to stop these institutions like Banks and Insurance Companies from ripping people off and creating a bigger and bigger recession.
Don't they understand that the mess we are in has been caused by these fat cats. How much money do they need in a lifetime anyway?
They are the ones who inflated house prices so they could skim money off now people (except them) have no equity.
It is time that house prices reflect their true value
- Jeanette, London, 22/01/2009 05:41
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Quote:
"A Lloyds TSB spokesman said: "Lloyds TSB has delivered significant profits generation for its shareholders for a sustained period of time."
In the US this is a fraud known as a Ponzi scheme (check out Carles Ponzi) - paying investors out of short term income knowing that the business model is an unsustainable bubble which is bound to burst eventually." - Not a very good argument by Lloyds TSB.
- Siam, Bangkok, Thailand, 22/01/2009 01:49
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i fully agree that the public don't moan when the going is good, however many are probably not aware of the dis honesty within these companies, and the PR machines behind leaders of these companies to ensure we like them. to take away money from these people will not hurt them as they are not like us and can always get capital from somewhere else. take the power or title away from them. as this in many cases is what leads to the problem in the first place. maybe if barclays and rbs hadn't have had such a show of male bravado this would not have happened. and remember many scots have dis liked sir fred for these actions and these very actions earned him the name fred the shred. looking back are these qualities to be impressed by.
- Jd, london, 21/01/2009 22:22
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directors have a duty to protect the company's asssets etc for the shareholders see the companies act 2006 . how come no shareholders - individuals or institutions or other seem to ignore this
- Lj, gerona spain, 21/01/2009 17:04
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I am not directly involved but do actually read the financial papers. Many bank departments have done pretty well - perhaps less so no we are in recession. The vast losses tend to be associated purely with the fixed income division - but are so big as to overwhelm the positive results. Of course with recession biting and financial markets in chaos 2008 and 09 will not be so good.
So - but you need to be specific and accurate before slagging people off.
- David, Fulham, 21/01/2009 16:48
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Of course bonuses should be repaid. The directors of the major banks have gambled with funds at their disposal. Their irresponsible decisions are causing hardship to countless people. To award them a bonus for such stupidity is a scandal.
- Douglas, Bristol, 21/01/2009 16:23
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I think all the counties should start their own banks to support their small businesses - which are the life blood of any community. Essex has done it, so perhaps trusted people in each county (Not the County Council heads) should set up a bank.
- Jane, london, England, 21/01/2009 16:02
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John Bloomfield, Twickenham you are mistaken there is a clause in the banking laws which states that bonuses must be refunded if found to have been taken for such circumstances that we have now.
So I have never understood why the Government has not asked all the traders and other City people taking huge amounts for selling hot air to hand the money back, instead of asking old age pensioners and the poor (which is all of us now) to pay for the bankers excesses.
Also, why has Brown insisted that the banks must pay him 12% for the bailout cash but insist that they lend at 2007 rates and at 2%? Of course they are not going to.
Also, why haven't the other parties mentioned this?
- Jan, london, England, 21/01/2009 16:00
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And not before time.
They were getting the company into a whole so why reward them? If they were found with their hand in the till they would be sacked without compensation and what they did was a type of fraud, benefitting them, for all the other targets they met.
If involved in wrongdoing, the sack, including loss of pension benefits. I have been voting against remuneration packages for years and it seems they were 'achieving' goals that merely exposed the companies to huge losses that have now come home to roost.
There is gambling and then there is gambling, and if they took the company's money to the dog track, they would almost certainly have been sacked.
Let it be so, as well as for our shower of a govt.
- Hugh, Middx, 21/01/2009 15:21
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We'll if any of them has any 'smarts' the money wont be held in a UK bank...just in case it goes belly up. So I would guess its all in some tax haven somewhere and completely untouchable by angry tax payers. God bless Mr Browns accommodation of 'Non Doms' and anybody who is rich.
- Bondy, london, 21/01/2009 15:03
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the banks are partly - not wholly- to blame for the current crisis. but they are responsible for their incompetence. bonuses should be repaid. and the government should not be so cavalier with our money by bailing out the banks. as long as people's funds are safe then some of these banks deserve to go bust.
- Josh, london, 21/01/2009 14:34
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Sir Fred Goodwin KBE ( King of the Banking Eejits)
- Alex, Southampton, 21/01/2009 14:32
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The record profits in the past years were based on overvalued assets. These assets were overvalued because the rating agencies had under estimated their risk. The banks and the rating agencies knew this. Forget the bonuses. People should be going to prison.
- Alex C, London, 21/01/2009 14:28
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Nice idea and morally correct that these collective destroyers of our wealth should hand back some of their ill gotten gains that were not based on 'real' performance
However, when we are led by men of no honour such as Brown, Darling and Harman, how can we expect honourable behaviour from a bunch of self-seeking bankers or the bloated Public Sector with their gold plated pensions and cannot be fired culture?
- Laurence, Cyprus and London, 21/01/2009 14:10
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Recovering inflated salaries and bonuses is, unfortunately not going to happen despite what people say, because they were agreed within a legally binding structure supported by the companies' owners, namely the shareholders.
But executive pension should be scrutinised possibly because of the two tiered structure that executives alone voted for, which gave them final salary schemes, and the rest of the staff received money purchase schemes with full exposure to market volalitity.
That and stripping the likes of Goodwin his knighthood for services to banking, are far more realistic targets
- John Bloomfield, Twickenham, 21/01/2009 14:05
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£143 million? lets say the average wage for a person who works in a bank is £24000 (rough guess) - that means if these bank robbers were to repay the bonuses they should never have got the banks could employ nearly 600 new staff!!! Surely this would help the economy and the banking sector! It won't happen though as there is one law for the fat cats and another for the poor they have ripped off...
- Mc, London, 21/01/2009 14:00
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This will never happen simply because bonuses are paid for the year that has lapsed on the basis of performance during that year. There is no clawback clause if things go wrong years down the road. As for you all outraged people I dont recall any of you complaining when the markets were strong. The City continues, even today, to provide a contribution to the country's GDP no other industry can remotely come close to. Britain cannot afford to lose the City to Frankfurt or Paris, simple as that. It is indeed sad that some people's lives have been badly affected by the recent global (not UK) events. But with high risk comes a high price to pay when markets (financial, house et al..) collapse. So stop pretending to be so offended and see you again when markets change for the good and you start queuing again for a piece of the action.
- Daniel, London, 21/01/2009 13:54
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This smacks of double standards, MP's can still claim all of their expenses with impunity and if the vote to overturn the decision to make their expenses public goes through tomorrow, they'll be sitting pretty exactly like the bank directors.
- Bob, Cheam, 21/01/2009 13:50
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There is zero chance of them giving it back voluntarily, therefore, every bonus paid out to an employee or director of a bank or financial institution should have a windfall tax placed on their bonuses over the last 5 years. if they've spent it, then an attachment to earnings should be levied.
- Kerry, Purley, 21/01/2009 13:40
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So it was in 2003 that concerns about "irresponsible lending" first began to be widely aired. What part of the phrase "irresponsible lending" did Gordon Brown (as Chancellor)not understand when this concern was being "widely aired"? What part of the "integrated Regulatory structure" that Gordon Brown created and then hailed as one of his major achievements SHOULD have (but clearly DIDN'T) take corrective action at the time. You can blame the Bankers all you like, but the real culprit in all of this is Gordon Brown who, as Chancellor and then PM, allowed this to happen on HIS watch. When people in power start to point the finger of blame at others (as Gordon keeps doing) then it usually means they have something to hide themselves.
- Malcolm, London, 21/01/2009 13:28
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Bankers should get paid more to put with all the annoying UK tax payers
- Jerome Kervel, Milton Keynes, 21/01/2009 13:09
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Why do companies pay bonuses. All that seems to imply is that you cannot get the individual to do the job that you paid him to do in the first place!!!
- Pedro, Dubai UAE, 21/01/2009 13:09
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Sure pigs can't fly but seeing this thing happen will be more like seeing one tap dance down the street
- Dc, London, 21/01/2009 12:39
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How does one reconcile imposing money purchase schemes on everyone elses pensionss, whilst retaining final salary schemes for executives ?
Clearly the executives didn't have full confidence in money purchasing BECAUSE it was linked to the stock market, so presumably can be questioned as to the extent of their duplicity ?
- John Bloomfield, Twickenham, 21/01/2009 12:31
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Hit them where it hurts ... in the pocket.
- Steve Jones, Cambridge, 21/01/2009 12:29
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This is absolutely the "right decision"!
And whilst they're at it, they can authorize the immediate - rebate & compensation - to reimburse their "Ripped-Off" customers for their systematic, unnecessary, greedy "over-charging" over the last 10 years? The government should "immediately underwrite these automatic repayments" in respect of ALL of these outrageous "overcharges", with FULL repayments being made automatically within 30 days? After all, the "fat-cat bankers and directors" have ALL received their vulgar excessive salaries, bonuses & profit shares for years on the back of these unscrupulous practices.
Furthermore, perhaps New Labour and/or its Regulators who did NOTHING about this totally unnecessary, greedy "over-charging" could NOW be deemed to have been "contributory negligent" and/or "vicariously liable" for permitting these practises to both occur and to continually recur over the decade timeline?
- Fraser, Telford Park, 21/01/2009 12:02
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If it's too difficult to get the bonuses back, what about hitting their pensions ?
- Doug Watt, london e14, 21/01/2009 11:57
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There is a yearly 13 billion pound hole that can be plugged quite easily
- Steve Byrne, christchurch UK, 21/01/2009 11:49
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Fair enough. The bankers may have paid themselves big bonuses. STOP using them as an excuse. If they should return their bonuses, so should all the job worth's within government.
So long as they were making money, did the government complain ! "NO" they got their slice in taxes. Now it's gone wrong, they want a scapegoat. The country is going to pot and all BROWN can do is blame the bankers. It was his watch and he screwed up almighty. God forbid, it's our and ours children future his is playing with.
- Alec, London., 21/01/2009 11:37
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As a shareholder in RBS I am very dissapointed in the total performance of the bank. They have been gambling with our money for their personnel gain.
Had I have acted in the same way in my job I think that I would now be facing criminal proceedings.
- Tim Davies, Formby / Merseyside, 21/01/2009 11:35
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Could someone please tell me how many court cases are pending as a result of this negligent behaviour?
- Adrian, Bexley, 21/01/2009 11:33
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The UK taxpayers will believe it when they see it.
I don't actually believe it will happen.
- P I Staker, London, 21/01/2009 11:23
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Nice idea but vastly impractical. For example, imagine if you got paid a bonus for one year then two years later there is a downturn for one reason or another.
You were paid the bonus for that year and that year alone.You do not get paid a bonus with the provision of future performance as you would have to put the bonus away on the half chance it gets clawed back. What would be the point.
What about the bonuses paid the M&S staff in 2006/07 ? Their stock has dropped massively ?
- Sandy, London, 21/01/2009 11:11
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Erm, I presume that shareholders who happily took their dividends will also return the money? And those who sold their shares during this period at a high price will refund the difference? No?? Somehow I didn't think so. When the going was good everyone was happy with 'loadsamoney'.
- Gc, London, 21/01/2009 11:11
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If bonuses are based on performance then they must be made to repay the money immediately.
- R.F.York, Yorks, UK, 21/01/2009 10:57
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a twinkle of common sense and justice perhaps - I believe when I see the bonus's come back.
- Stuart, london, 21/01/2009 10:31
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Oooooooooh, look! A whole squadron of flying pigs!
- David Smith, Wellingborough, England, 21/01/2009 10:01
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If bonuses are based on performance then it is outrageous that these executives have accepted them.
- R.F.York, Yorks, UK, 21/01/2009 09:58
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