January 26th, 2012
09:15 PM GMT
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Davos, Switzerland (CNN) - It is perhaps not surprising that in a gathering of the elites at Davos, the issue of bankers’ bonuses is never far from the delegates’ minds.

But unlike in recent years - a time when bankers showed remorse over their high pay packets - there seem to be noises of a fight back.

Because with profits strong, the banking bonus culture is back - to the annoyance of many including the British Prime Minister David Cameron and the Governor of the Bank of England, Sir Mervyn King.

As they get ready to hand out the billions of dollars in extra reward, the critics are again saying this is unjust enrichment. Even more so, at banks like the Royal Bank of Scotland, bailed out and now majority-owned by the UK Government. The UK government appears to have got its way in ensuring RBS boss Stephen Hester’s bonus is slashed from GBP2 million to the benchmark of under GBP1 million (GBP963,000).

At Davos, I asked Barclays CEO Bob Diamond about the issue. He said it was all about "pay for performance." Diamond is not planning to offer up any concessions in his own bonus this year, which could be more than $15 million if reports are accurate. Instead, Diamond robustly said "every time I hear a political leader mention the eradication of pay for failure, I would like to hear them talk about the rewards for success."

He acknowledged that compensation will be down in the industry this year, and that he had to be "sensitive to the environment. "

Jamie Dimon, CEO of JP Morgan Chase, also recognizes the need to be sensitive. "People are angry because of lot of people in Wall Street made a lot of money as companies went down the tubes. And I agree with them." Calling it "a total disgrace," he defends his bank’s policy. "We have never had special severance packages. We’ve always looked at results over a long period of time."

This is unlikely to satisfy policy makers like Michel Barnier, the European Commissioner responsible for financial services, who says not enough has been done. He told me he’s hoping to introduce new regulations on compensation by the end of the year - something that will be deeply unpopular in the City of London, and confirm financiers’ view that Barnier is no friend of finance.

The arguments this year are not new and no stronger than previous years. It can be difficult to justify why people in the financial world get such large bonuses. In this morning’s Financial Times, John Gapper suggested "perhaps you simply get to eat a lot of chocolate if you work in a chocolate factory," which is unfortunately a statement that seems to be true.

I believe Bob Diamond will be sensitive to the environment, but it may not be enough for the vulture critics, waiting to attack the bonuses being handed out. I do wonder if the financial world has learned nothing from the past three years. Bonuses are all well and good, but at a time when so many are suffering from austerity - losing their jobs, worrying about paying the bills - a bit of gratitude, rather than greed, would not go amiss.



soundoff (32 Responses)
  1. Renato de Ávila

    The funniest thing about the curve game was that the guy of the labor unions gave 100 Swiss francs, Mr. Schab gave only 2, and the CEO of JPMorgan simply ignored the request for money. It was the most graphic image of each sector´s position on the current crisis…

    January 26, 2012 at 9:54 pm |
  2. Peter

    The bonus culture promotes greed and nothing more. "Pay for performance" is a canard, as anyone that worked in the finance world knows, since "performance" there is just blind random runs. On the other hand if left unchecked it quickly crosses the line into scams, lies and "whatever it takes". Everyone in finance knows this.

    January 27, 2012 at 1:30 am |
  3. Jack in London

    Peter – I wholeheartedly disagree with your statement that performance is just "blind random runs". I work in finance and have for years in the purest form of our industry; brokerage. I get paid in DIRECT proportion to the amount of commissions from trades that I generate. If I produce zero, I get zero...if I produce 10, I get a percentage of that. That is pure performance, and there is no way that anyone should be able to tell me that I am overpaid or underpaid. I'm paid what I earn through hard work, smarts and guile.

    January 27, 2012 at 3:51 am |
  4. togirl

    There are still too many people who are in trouble because of what Wall Street and the banks did. They haven't been remorseful at all, or done anything to correct the situation. I'm beginning to think the bailouts were a big mistake, because they haven't suffered nearly enough. The majority of the world is still reeling, and they get a REWARD??

    January 27, 2012 at 3:59 am |
  5. HZ

    Jack in London, you get commissions regardless you make profit of the trade or not, you only care about the revenue, so you get millions of "bonus" when the investors and companies you manage go bankrupt.
    wallstree culture is "greed is good" which is shameful. you guys will do anything to crack up big number so you get your bonus regardless of the reality.

    January 27, 2012 at 4:41 am |
  6. Mohd Haymour

    Millions of Dollars are going as BONUSES for Bank CEOs / as if those people are the only people on earth are DOING THEIR JOB RIGHT / others who are very ACTIVE & PRODUCTIVE in many other FIELDS as SCIENTISTS , LABORS , COMMUNITY LEADERS , POLITICAL LEADERS , CHARITY LEADERS , FARMERS , INDUSTRIAL LEADERS , RESEARCH GROUPS , MILITARY , JOURNALISTS , HUMAN RIGHTS & PEACE ACTIVISTS ,,,,, etc are SERVING ALL the MAJOR INTERESTS OF HUMANITY & they are not getting BONUSES ?????

    January 27, 2012 at 5:05 am |
  7. John

    I work hard. Do I get paid? Yes, by bringing in business. If it were by how much I sold, would that be right? Maybe for pay, but not for ethics. I talk customers out of spending money that benefit me just because of the money. It affects my salary, but it is the ethical thing to do. This is a question about money. But the bigger and more important question is how it relates to ethics. What kind of human are you, anyhow? Here in Atherton/Menlo Park/ VC capital of Silicon Valley, I see lots of extremely nice cars. But I always ask, "Are they a nice person?" What simple priceless kindness have you done today? When you die, you will not be asking about the millions you have made, but if you have been a nice person. Trust me.... Life and death teaches everything... Not money.

    January 27, 2012 at 5:28 am |
  8. Davis

    I think there's a chicken-and-egg situation where banks are expected to plough back earnings in such a way that motivation for better performance may not support. It is up to the shareholders to call the shots.

    January 27, 2012 at 5:29 am |
  9. Frank

    These Fat Cats were given HUGE bonuses, even when they made the most horrible decisions: 2008. We were told that in order to keep the Best and Brightest, that's just the way it was. If they were so dang good, then why did they do such a bad job running the economy and banks? Even a child could have done a better job. There are two standards for competency: one for the elite, and one for everyone else. I guess it all starts in the Ivy League; the attrition rate for such schools is around 1%; I guess once you get to the top of the mountain, the Powers That Be make sure you stay there, and have way more than the rest of us. Finally, many of these bankers should have been jailed in 2008!

    January 27, 2012 at 10:17 am |
  10. Shadow

    They should all be hanged like they do in other countries.

    January 27, 2012 at 10:56 am |
  11. Davis Bradley

    CEO's take the risks and if they do well they should receive the rewards. So they deserve the huge salaries and bonus packages. Also, they donate much of what they make to the poor so giving CEO's millions in bonuses actually helps the country's poor.

    January 27, 2012 at 11:21 am |
  12. MiamiC

    Executive yearly bonuses in the millions are not the same as profits in the millions for entrepeneurs. The entrepeneur had initiative, went out on a limb, was creative and took a real risk of failure; a bank exec is an employee that gets a big salary for handling other peoples wealth and really risks nothing except having to look for a new job if he is particularly inept (though banks are known for rarely firing their top execs, even inept ones). Wether that wealth grows or shrinks is more often than not a result of economic and market factors beyond the exec's control. At best, a bank exec that is a particularly good administrator shouldn't get more than a couple of hundred thousands for his extra effort. In todays recesionary situation, bank execs shouldn't get anything at all.

    January 27, 2012 at 12:40 pm |
  13. /sigh

    Davis Bradly, there is not a single CEO who takes risks.
    All of them receive bonus checks and high salaries regardless of the company doing well or not, look at the giant bank catastrophy in 2008, CEO's still received huge bonus checks and salaries even though they flounderred their company.

    January 27, 2012 at 1:47 pm |
  14. Rob

    Top execs bonuses should be linked to the company performance and also to the country's economic performance.

    January 27, 2012 at 1:58 pm |
  15. Bob 351

    Don't they already get a higher, possibly negotiated pay because of the nature of the job. Enough of the perks. Do your job right and you will be rewarded with the satisfactory knowledge that you get to keep your job. Just like everyone else.

    January 27, 2012 at 2:55 pm |
  16. Thing

    @Davis Bradley

    What risks do CEOs take? When things are going well they shovel up as much money they can get. When things are going badly they STILL shovel up the money and fire everybody else, before being thrown even MORE money to leave.

    Once you reach that level and gain entry into the magic money kingdom it seems to be accepted that you should grab as much money as you can before the music stops, leaving 100s if not 1000s of genuinely hardworking people on the streets after you 'streamlined' their jobs out to some prison in China. Executive pay is basically a racket, with executives on remuneration boards signing blank cheques on the implicit understanding that tomorrow someone else will return the favor.

    January 27, 2012 at 5:07 pm |
  17. Mike

    Davis Bradley: CEO's do not take personal risks. They risk the equity of their shareholders and the livelihoods of their workers, but they get paid either way. We are not talking about the Henry Fords or John Rockefeller s here – people who built their own companies and risked their own money. We are talking about glorified bureaucrats: people who have proven skilful in advancing in complex, hierarchical organizations. They may or may not have any actual business savvy and studies have shown there is little or no relationship between what they make and the success of their companies.

    January 27, 2012 at 5:14 pm |
  18. eman

    See the elephant is dying and die a very sad situation

    http://upload40.com/12160.html

    January 27, 2012 at 5:33 pm |
  19. oo

    disgraceful . they should be paid more. peasants always come up with something to get their hands on the ceo's well deserved wealth.

    January 27, 2012 at 7:12 pm |
  20. FormerBBall

    Blue collar has no problem paying a sports figure to 'lead their team to victory' but to think of paying a business superstar to lead 1000+ jobs big money and worker bees think it is robbery. Make no mistake, CEO's are the cream of the crop, whether their businesses rise or fall under their leadership 99% have earned their right to play at that level and deserve every dime they get. Most CEO's corporate 'lifespan' is less than that of a pro athlete.

    January 28, 2012 at 1:15 am |
  21. /sigh

    @formerbball – People pay to watch the game, media pays as well, there is a CHOICE for the people, if the team does badly they are not taxed to make up the difference when fans stop showing up, unlike corporations.
    CEO's are NOT the cream of the crop, they do not help anyone but themselves in anyway,people such as doctors working on the cure for cancer are the cream of the crop.
    Within that "lifespan" CEO's make more than an athlete makes his entire career.

    January 28, 2012 at 3:39 pm |
  22. naveen

    CEO's of all Banks have the biggest Bonuses especially the Wall St Investment Bankers and every Investment Bank and every Top 10 Banks of all of US and Europe have had the largest Bonuses since 2005 till 2011 when they have allowed the
    World Economy go into a very deep recession since 2008 and continuing till now.The financial Crisis of US Mortgages and in Europe was actually the making of all the top banks in US & EU where FED and ECB had to bail them out with Tax Payers money and more Govt Debt and not a single CEO,CFO and financial directors ,managers were arrested and instead rewarded with big bonuses.The powerful and rich are dealt with double standards regarding massive robbery and Plunder.

    January 28, 2012 at 8:22 pm |
  23. Magnus

    I enjoy watching your shows, Richard; they are often entertaining and informative. However, I am always amused by the predictions by economists that there is a 30 or 40 or 70 percent probability for a recession. It would be interesting to know on what kind of research such figures are based on (for example similar situations in the past,), and how in retrospect someone who predicted a recession by for example 20 percent is less right than someone who predicted it by an 80 percent probability. Both could claim to be right in case of a recession. It is especially amusing to hear the same people increase the percentage from one day to another, one day 10 percent and the next day 20 for example until they finally reach 100 percent ;) To many it might sound like a real science where one would be able to perform several tests with different outcomes. In reality, the outcome could be almost certain given all the underlying factors, even though the so called experts claim that there is a small risk of a recession, just like before the financial meltdown of 2008 when rating companies started to downgrade banks only after the facts were clearly visible to all.

    January 29, 2012 at 3:08 am |
  24. peterr54

    This one's for London Jack.

    I remember not very long ago that Governments and Central Banks were told (by whom you may well ask) to keep their toxic assets and bad loans off the balance sheet.

    We all know that losses which are now off the balance sheets, are in reality being funded by tax payers while huge amounts of interest free "loans" from the FED and ECB are being pumped into the system in exchange for "swaps", which are just one form of debt being transferred for another form of debt.

    So which balance sheet are these bankers bonuses related to Jack and are those off-balance sheet trades due to being guile or smart????

    January 30, 2012 at 12:15 am |
  25. Doug

    Richard, let's face it, your show in my opinion is crap without you. It is like "Mad Money" without Jim Cramer, it would suck. Why can't you host the ENTIRE show more often?

    January 31, 2012 at 7:14 pm |
  26. Floyd Burgoz

    I believe in bonuses for all and yes including big bad bankers. However a bonus should not come at the expense of any countries taxpayer. If I am a stakeholder/RBS Joe Public stakeholder, I would like to be heard at the board meeting that hires, fires and hands out bonuses. It is only fair.

    February 2, 2012 at 5:24 am |
  27. Anonymous

    The UN security council just rejected the Syrian resolution...

    ALL of you are SO involved in your own self-interest and preservation that NONE of you see the CLEAR path to peace and hope in the future RIGHT IN FRONT OF YOUR EYES being given to you on a silver platter...OMG...

    tick tock, tick tock, tick tock

    February 4, 2012 at 5:06 pm |
  28. jgp

    Performance management is a very old technique which many enterprices use extremely well. Even when its used at the board and executive level, when a comitte for compensation is utilized in the process. The probem with nthe banks is that they seldom use this process to pay adecuate salries to their executive, but pay on some out of the box formula mosr likely called buddy buddy formula. No CEO is worth $16,000,000....there is just no way. An average bank employee (supervisor) type ,makes 40 mto 50k a year, now what the formula for this? In the old days it was like you boss would make up to 20% more than the subordinate. So if you are ten layers up the management latter , which is a lot of layers. You do the math...wiññ never be 16m

    February 10, 2012 at 3:06 am |
  29. Sagir

    for all the aspiring black jack palreys out there. Yes card counting gives you a small edge and by small I mean small. even, if the count is high for high cards to come out at the end of the day, cards will come out random as its usaully a 6 deck game and its very rare for a game to reach a good count and not having the proper bankroll to make the proper bets makes card counting useless.I would say having perfect basic strategy down and having good bankroll management will help you more.

    May 14, 2012 at 2:29 pm |
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