Do Bankers Deserve Considerable Bonuses in Today's Society?
In today's culture, the pay of bankers is unregulated and banks are able to reward their productive workers with bonus payments. Investment bankers can receive bonus payments that exceed their annual salaries. With many people currently suffering from the decision to bailout several banks when investments went wrong, we should be asking ourselves whether bankers deserve considerable bonuses whilst many are unemployed and whilst governments control a significant stake in several banks.
The case for bonus payments centres around the belief that these bankers have helped to produce considerable profits for their company and should therefore be rewarded. In addition, there is a theory that if bonus payments were removed, the top performers would leave for another bank that would reward them for their profit-seeking performances. However, considerable research has been undertaken by Boris Groysberg, a professor at Harvard Business School, who noticed that bankers that left one company for another experienced a drop in performance that lasted for at least five years. This leads to the question of whether star performers do so well because of their own ability or whether other factors have a significant part to play.
Many argue that investment bankers don't deserve substantial bonuses, especially when other professions such as engineers and doctors don't receive additional financial payments. However, the nature of investment banking is very different, where profits are volatile and alternatively people argue that bonuses provide the necessary motivation.
It is hard to argue that if you have had a hand in producing significant profits for a company that you don't deserve a reward. However, a significant problem occurs when you consider the opposite. When you contribute to a significant loss for a company, the opposite of a bonus does not occur. An investment banker will not reach into their bank account to correct a poor investment and the debt produced from this poor decision is saddled with the company. As we saw in the 2008 financial crisis, this can happen and when it does, governments and in effect taxpayers are left to bailout banks who have made poor investment choices.
Therefore it can be argued that investment bankers do not deserve considerable bonuses, as long as they are unwilling to reach into their own pockets to refill the bank's balance sheet when money is lost from a poor investment. This lack of accountability for poor investments does not justify bonus payments being rewarded for when times are good.
This is of greater importance when countries are suffering from a global recession caused by the poor decisions of several banks. While millions remain unemployed, it simply does not make sense for banks that have received bailout packages to continue with this type of financial remuneration.
The case for bonus payments centres around the belief that these bankers have helped to produce considerable profits for their company and should therefore be rewarded. In addition, there is a theory that if bonus payments were removed, the top performers would leave for another bank that would reward them for their profit-seeking performances. However, considerable research has been undertaken by Boris Groysberg, a professor at Harvard Business School, who noticed that bankers that left one company for another experienced a drop in performance that lasted for at least five years. This leads to the question of whether star performers do so well because of their own ability or whether other factors have a significant part to play.
Many argue that investment bankers don't deserve substantial bonuses, especially when other professions such as engineers and doctors don't receive additional financial payments. However, the nature of investment banking is very different, where profits are volatile and alternatively people argue that bonuses provide the necessary motivation.
It is hard to argue that if you have had a hand in producing significant profits for a company that you don't deserve a reward. However, a significant problem occurs when you consider the opposite. When you contribute to a significant loss for a company, the opposite of a bonus does not occur. An investment banker will not reach into their bank account to correct a poor investment and the debt produced from this poor decision is saddled with the company. As we saw in the 2008 financial crisis, this can happen and when it does, governments and in effect taxpayers are left to bailout banks who have made poor investment choices.
Therefore it can be argued that investment bankers do not deserve considerable bonuses, as long as they are unwilling to reach into their own pockets to refill the bank's balance sheet when money is lost from a poor investment. This lack of accountability for poor investments does not justify bonus payments being rewarded for when times are good.
This is of greater importance when countries are suffering from a global recession caused by the poor decisions of several banks. While millions remain unemployed, it simply does not make sense for banks that have received bailout packages to continue with this type of financial remuneration.
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