State owned Northern Rock have enraged critics by announcing that it’s staff will earn bonuses of up to 60% of their salary as part of an incentive scheme.
Northern Rock staff and executives will be paid the bonus as a reward for repaying the government loan of £26billion as early as possible.
The Tax Payers Alliance have warned that it will be the general public that would be left to foot the bill. Matthew Elliott, chief executive of the TPA warns, ‘Dishing out huge amounts of money when Northern Rock is still reliant on taxpayers’ help would be wrong and unfair to ordinary families.”
Others critics are concerned that the bonus plan will encourage an aggressive approach by the banks staff. Chris Tapp of Credit Action expressed his concerns over “risks created by the bonus culture”, something we are all to aware of. He said ‘It can incentivise staff to make decisions based on short-term factors that allow them to get their hands on bonuses as quickly as possible, but which aren’t necessarily in the best interest of customers. You can see how that would lead to pursuing people for collections or repossessions quicker than might be really necessary.’
Northern Rock has denied allegations that it was taking an aggressive attitude towards repossessions in a bid to repay the government loan.
How often have we read in the last few months that the ‘bonus culture’ for bankers and financiers has to change. And yet here we are still in financial crisis and falling into the same trap again. Isn’t it enough to be paid a good salary for doing a good job? Especially in this period of mass unemployment.
1 comment so far
1 Carl Malways // Oct 22, 2008 at 6:06 pm
I don’t think we can damn bonus schemes totally. There is something to say for paying people bonuses related to performance as it encourages people to put in the extra effort and to perform above expectations. Bonuses are a useful incentive and beat an inefficient system of constantly monitoring people to see whether they are performing their jobs properly.
The problem with the bonus system in some banks was that it was encouraging short-termism and too much risk. These were very poorly run bonus schemes.
However this should not be used to damn all types of bonus related incentives.