Countering the myths that bankers will leave if bonuses are reduced

There is widespread anger because bonuses are out of proportion with average incomes, reasonable reward, or the perceived social usefulness of banks.

Duncan Exley is the campaign director for One Society

When George Osborne today announced an increase in the bank levy, he also conceded he had not yet struck a deal on limiting bankers’ bonuses, nine months after the coalition agreement promised:

“…robust action to tackle unacceptable bonuses in the financial services.”

There is widespread anger because bonuses are out of proportion with average incomes, reasonable reward, or the perceived social usefulness of banks.

Despite this, and the person-hours spent exploring options, we still do not have even a weak response to astronomical bonuses. This suggests we need to institutionalise some checks and balances, to avoid an annual ritual of calling for a steam hammer to crack a nutty level of pay and bonuses.

One precondition for this would be for the government, opposition and commentators to counter the “big-bonuses-are-necessary” myths with evidence. One common myth is that bankers would leave if bonuses were reduced. However, recent research by eFinancial Careers confirmed that:

“The fact the payments are higher in London pours cold water on the claim that bankers would leave Britain for jobs overseas if they were not paid big bonuses.”

i.e bonuses can take quite a cut before bankers are tempted to move elsewhere. Where bonuses have been restricted, some in banking admitted that this caused:

“…no problems recruiting a bumper crop of talent.”

The other big  myth, that bonuses improve performance, is contradicted by academic psychological research commissioned by the Federal Reserve Bank of Boston:

“…for tasks that include a cognitive component, there seems to be a level of incentive beyond which further increases can have detrimental effects on performance.”

This suggests that raising low pay may be beneficial.

Beside myth-busting, the composition of the groups who scrutinise and decide high pay and bonuses should be broadened. This could include:

• Mandating the inclusion of investor and employee representatives in remuneration committees, and instituting equivalent structures to scrutinise and set bonus strategy;

• Requiring the highest bonuses to be revealed in annual reports, alongside the ratio between an organisation’s top and bottom remuneration rates; and

• Requiring investors to report how they have voted at AGMs, as advocated by Fair Pensions and others. In the case of banks, major shareholders include our pension funds and our government: shouldn’t we be told how they are using the votes they cast on our behalf?

The current BIS review, ‘A Long-Term Focus for Corporate Britain’, to which One Society has responded, has begun to ask whether broadening the group of those who scrutinise and decide remuneration rates would be helpful, though some lobby groups have warned against such moves, fearing results that appear similar to the mythical spectres discussed above.

40 Responses to “Countering the myths that bankers will leave if bonuses are reduced”

  1. Matthew Zarb-Cousin

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced: //bit.ly/hYotla by @One_Society's Duncan Exley

  2. ronisgreat

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced: //bit.ly/hYotla by @One_Society's Duncan Exley

  3. One Society campaign

    Our blog on @leftfootfwd: 'Countering the myth that bankers will leave if bonuses are reduced'. //bit.ly/hYotla

  4. Liz McShane

    Just on a practical level, I think a lot of foreign nationals who are bankers like living in London compared to other cities because of the lifestyle & variety etc. that the capital offers and would be very loathe to re-locate if it meant that their bonuses were intact.

  5. FairPensions

    Will bankers leave if #bonuses are slashed? Some myth-busting from @One_Society on @leftfootfwd //bit.ly/fRrrBo @equalitytrust

  6. Gavin Duff

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced: //bit.ly/hYotla by @One_Society's Duncan Exley

  7. One Society campaign

    Great to have our blog up on Left Foot Forward in which Duncan Exley counters the myth that our bankers will flee… //fb.me/FhPHYRf4

  8. downinjamaica

    RT @One_Society: Our blog on @leftfootfwd: 'Countering the myth that bankers will leave if bonuses are reduced'. //bit.ly/hYotla

  9. Richard

    We should also be countering the myth that the banks will leave if we regulate them too much for their liking. The banks need reminding that they would no longer be in business today were it not for the security of UK Plc’s balance sheet. The idea that megabanks would move to other countries is simply ludicrous. They need a large public balance sheet to back them up, otherwise they will not be able to borrow anywhere near their current amounts. There is no way that a JP Morgan Chase or a Barclays could consider moving to places like Grand Cayman, the Bahamas, or San Marino as off-shore financial centers.

  10. Brutus Teabags

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced: //bit.ly/hYotla by @One_Society's Duncan Exley

  11. Jane Watkinson

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced //bit.ly/gz6ksL <<< For some sense.

  12. Andrew Tindall

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced: //bit.ly/hYotla by @One_Society's Duncan Exley

  13. Rachel

    Countering the myths that bankers will leave if bonuses are reduced | Left Foot Forward //goo.gl/1LGzm

  14. Rachel

    RT @JaneWatkinson: RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced //bit.ly/gz6ksL <<< …

  15. Robin Hood

    RT @Gertiepink: Countering the myths that bankers will leave if bonuses are reduced | Left Foot Forward //goo.gl/1LGzm

  16. Kathrine Stokes

    RT @Gertiepink: Countering the myths that bankers will leave if bonuses are reduced | Left Foot Forward //goo.gl/1LGzm

  17. glynis powell

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  18. Oliver Stoney

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  19. Gail Cartmail

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced //bit.ly/hYotla

  20. Itsmotherswork

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced //bit.ly/hYotla

  21. Andrew Fenlon

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced //bit.ly/hYotla

  22. Northern TUC

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced: //bit.ly/hYotla by @One_Society's Duncan Exley

  23. John Turner

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced //bit.ly/hYotla

  24. UNISON East Midlands

    Countering the myths that bankers will leave if bonuses are reduced //is.gd/7mj6SG

  25. Hannah Lownsbrough

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced //bit.ly/hYotla

  26. Tom Allen

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced //bit.ly/hYotla

  27. johntucker

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced: //bit.ly/hYotla by @One_Society's Duncan Exley

  28. tompowdrill

    RT @One_Society: Our blog on @leftfootfwd: 'Countering the myth that bankers will leave if bonuses are reduced'. //bit.ly/hYotla

  29. L DTUC

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced: //bit.ly/hYotla by @One_Society's Duncan Exley

  30. simpkins83

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced //bit.ly/hYotla

  31. Double.Karma

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced //bit.ly/hYotla

  32. Nick Beddow

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced //bit.ly/hYotla

  33. Colin Jackson

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced //bit.ly/hYotla

  34. RCT UNISON

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced //bit.ly/hYotla

  35. Daniel Pitt

    RT @leftfootfwd: Great piece from @One_Society countering myth that bankers will leave if bonuses are reduced //bit.ly/hYotla

  36. Mr. Sensible

    The banks need to understand that this sort of thing won’t wash.

  37. Tory dependence on City money should come as no surprise | Left Foot Forward

    […] Osborne and Cameron to the City, from the limp banking levy to their failure to take action on bonuses, coupled with the revelation last week that, in opposition, they were encouraging the Labour […]

  38. britainologist

    RT @leftfootfwd: Countering the myths that bankers will leave if bonuses are reduced //bit.ly/gz6ksL

  39. UK Uncut and unmasking the banks’ informal power structures…. « My Political Ramblings

    […] We have to fight the nonsensical view that the bankers will just get up and go if we tax them more (see here for a really good blog dispelling that myth); this is a mere attempt to divert attention from the […]

  40. How bankers’ bonuses are contributing to the new credit crunch | Left Foot Forward

    […] Countering the myths that bankers will leave if bonuses are reduced – Duncan Exley, February 9th […]

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