Blame it on the bonus culture
ANOTHER year on, and nothing threatens to prick the investment banking bubble. The big bonus announce-ments are arriving right on cue.
Alison Carnwath, former chairman of the remuneration committee at banking giant Barclays, put it well when she appeared before the Parliamentary Commission on Banking Standards recently. She talked about how, in the banking sector, a “culture of entitlement” had been created when it came to bonuses.
While most of the population deals with the Coalition’s austerity programme, with many people hard-pressed to buy necessities and struggling to pay off festive expenditure, thousands of UK-based investment bankers will be thinking of the directions in which they can throw their latest wads of cash.
It would have been inconceivable in the autumn of 2008, when the collapse of Lehman Brothers sent the global financial system into meltdown, that big investment banking bonuses would have returned so quickly.
In actual fact, with a little bit of tinkering here and there, the bonus merry-go-round has never really stopped. If there was a brief pause, perhaps we blinked and missed it.
There are millions of people in this country, working in both the private and public sectors, who go the extra mile every day and often have to work ever harder as employers cut their staffing.
These people remain committed, amid pay freezes or paltry rises, in some cases driven by a sense of professional pride, in others motivated by terror of losing their jobs. A sense of moral duty often plays a part.
There are others in society
who create significant wealth and employment who receive big rewards, and deserve them for the risks they take and the effort they put in. Many make further big contributions with their philanthropic endeavours.
So it is no wonder that most of us look with bewilderment at the many investment bankers who are paid a fat salary, and then appear to require a bonus before they start to do some work.
Ms Carnwath’s “culture of entitlement” phrase rang a bell.
In a speech last June, David Cameron launched a scathing attack on what he claimed was a “culture of entitlement” .
But his speech was aimed at justifying swingeing cuts to welfare provision, a central plank of a Coalition Government economic policy which has brought the UK to the brink of a triple-dip recession.
Mr Cameron spoke about building a “more responsible society” and he talked about the welfare system having encouraged “irresponsibility”.
He offered his opinion that a gap had been created “in this country between those living long-term in the welfare system and those outside it”.
He declared: “This has sent out some incredibly damaging signals. That it pays not to work. That you are owed something for nothing. It gave us millions of working-age people sitting at home on benefits even before the recession hit. It created a culture of entitlement.”
There is debate to be had about whether or not welfare provision needs to be reformed. Yet there is evidence to show that Coalition welfare policies are hitting the most vulnerable in society.
The investment bankers are, by and large, among the least vulnerable in society.
The case for tackling their bonus bonanza – the results of which threatened to bring down the financial system and opened the door to a massive global economic downturn – is cast-iron.
So what about the investment bankers’ “culture of entitlement”? What about them getting “something for nothing” ?
On the subject of something for nothing, is this not the definition of those guaranteed bonuses we have heard so much about in the investment banking sector?
And what about the billions paid out in bonuses around the world over the years for behaviour which turned out to have destroyed, rather than created, value? That is surely far worse than something for nothing. What about the gap created in our society between those living in the investment banking sector and those outside it?
And was there not grave “irresponsibility” in the global investment-banking-sector– encouraged by the bonus system and greed of many of the participants in this. This “irresponsibility”, driven by people claiming bonuses rather than benefits, has blighted the lives of millions across the UK.
The sections of Mr Cameron’s speech, quoted above, would with a few tweaks have been far better applied to the investment banking sector. After all, it was this sector which triggered the worst economic downturn since at least the 1930s, not those claiming welfare. The vast bulk of welfare claimants are the innocent victims of what has transpired. In spite of all the rhetoric, they had nothing to do with it.
Of course there are practical difficulties in eradicating the bonus culture given the global nature of this market-place and ingrained greed.
However, if Mr Cameron wants to take the moral high ground against those trapped in a “culture of entitlement” who are taking “something for nothing”, have shown “irresponsibility” and created a gap between them and the rest of society, perhaps he should first look down on the investment banking sector.
David Cameron’s attack on a culture of entitlement was aimed at justifying cuts to welfare provision