With the money flushing as bonus to bankers and the uproar in the West about excessive pay, are bankers being treated unfairly?

Do they deserve the typical $500K paid as bonus to VPs or EDs at the bulge brackets?

Most VPs are about 28-33 with about 8 years work experience, does it make sense they are making more than an average top 250 firm CEO who does more work than them?

Is their talent any better than that of a Doctor, Rocket Scientist, University Don, Lawyer or Management Consultant and hence deserve the high pay?

I had a similar discussion with candylips yesterday

https://www.nairaland.com/nigeria?topic=363994.msg5078800#msg5078800

IMO, i think they deserve the bonuses they get (on assumption that they meet their targets) simply because if i am making my company and her shareholders millions of profits every year due to ma shrewd investments then i expect to get a share of that bounty.
It's as simple as that.

jay bee:

I had a similar discussion with candylips yesterday

https://www.nairaland.com/nigeria?topic=363994.msg5078800#msg5078800

IMO, i think they deserve the bonuses they get (on assumption that they meet their targets) simply because if i am making my company and her shareholders millions of profits every year due to ma shrewd investments then i expect to get a share of that bounty.
It's as simple as that.

When you say they make money, I hope you realise that is mainly on paper and is dependent on the liquidity of the market. By this time they would have remove real money to pay bonuses.

Warren Buffett said they are merely passing people's money about. Is that something special to warrant the millions?

My point of debate is that "is their 'skill' worth the pay"?

Ain't the Real money as you call it the bonus pot normally set aside by those big IB's. I want to believe that dat portion won't have any direct influence on any liquidity squeeze dat may or may not occur.
Companies don't have liquidity squeeze cos of the bonuses paid.

Bonuses are needed cos if you are a commodity trader, bought million barells of oil when it was still at $60 per barrel then sold on at peak price of $100 per barell dats a massive 67% increase on the initial investment which should warrant that trader about at least 10% of the profit earned.
do the maths

Sagamite:



My point of debate is that "is there 'skill' worth the pay"?

It is because a scientist is not trained to earn his or her emplyers percentage profit increase yearly.
If a scientist invents say a bug or a cure for something then they get catapulted into one of the world's richest.

These bankers work more hours than the norm, they have to stay current/informed 24/7 so as to get that investment edge.

why shouldn't they get rewarded for all the hard work that they do?

jay bee:

Ain't the Real money as you call it the bonus pot normally set aside by those big IB's. I want to believe that dat portion won't have any direct influence on any liquidity squeeze dat may or may not occur.
Companies don't have liquidity squeeze cos of the bonuses paid.

Bonuses are needed cos if you are a commodity trader, bought million barells of oil when it was still at $60 per barrel then sold on at peak price of $100 per barell dats a massive 67% increase on the initial investment which should warrant that trader about at least 10% of the profit earned.
do the maths

That is exactly my point.

Aspects of banking involves putting people's money (and pensions) in the market at risk to the investor, really no financial risk of the banker exists.

When money is made on the return of the risk, the bankers have set up a system where they make a real return and get their money which is usually huge. The investor that is the risk taker gets a return that is usually on paper except they take the money out instantly at that point. The banker that has no risk (except reputational risk) makes a killing.

On the other hand, if the market crashes or wains a year later, they have already taken their share which is the real money part of the profit bundle but left the investor with the part wey oyinbo dey call "chimera". If money is lost, the bank has not lost a penny of its money as it has taken no risk with its money, it is not going to be penalised for losing money and the investor takes 100% of the hit as the risk was 100% with investor's money.

jay bee:

It is because a scientist is not trained to earn his or her emplyers percentage profit increase yearly.
If a scientist invents say a bug or a cure for something then they get catapulted into one of the world's richest.

These bankers work more hours than the norm, they have to stay current/informed 24/7 so as to get that investment edge.

why shouldn't they get rewarded for all the hard work that they do?

I think everyone would agree they should be rewarded for their hard work.

The part I am curious about is that is it reasonable to reward them "that much" for doing nothing really special and not sharing in the risk?

If a bank makes trillions from propriety trading, then they deserve every cent of bonus as it is full company risk.

I now understand where u r coming from.
But isn't that the main reason why the investment house are legally required to have readable and printable disclaimers (All investments involve different degrees of risk. You should be aware of your risk tolerance level and financial situations at all times) ?

People know that the value of their respective initial investments aren't guaranteed but still go for it cos of greed and thirst to get reach.

I'm sure you've read the article about Islamic banking (the pros and cons of it)?

Why do you think people will still want to invest in berkshire hathaway today despite the shares being the most expensive? They have a track record of having year on year increase on initial investment and i'm sure the analysts under warren's payroll will be getting bountiful bonuses yearly as well (maybe in the form of shares sha)

I am only ever sympathetic to people that have their live savings wiped away due to unauthorised investment actions on their behalf.
The case is similar to a lawyer getting paid regardless of winning or loosing a case.
By law you have the right to represent yourself but we generally do otherwise to allow the best in the business to represent us so as to have a favourable outcome

Sagamite:


The part I am curious about is that is it reasonable to reward them "that much" for doing nothing really special and not sharing in the risk?

If a bank makes trillions from propriety trading, then they deserve every cent of bonus as it is full company risk.

I'd prefer if we see the level of performance (percentage profit return) of these individuals before we can define what is much.
I honestly think they do more than they are given credits for.
Do we know the impact of the enormous tax that they pay make on economy? I am sure you know why Alistair Darling or any other finance minister aren't bold enough to ban bonuses.

Do you know what ripple effect it will cause on UK's economy if these bankers are to move their dealings elsewhere? that enormous hole would have to be filled elsewhere which might lead to more PAYE for the average brits, sever cuts in public spending so as to have a balanced budget.

I think the issue of sharing the risk should never come into questioning simply because people aren't forced to invest. Investments are usually done at one's own risk.

That is exactly my point.

Aspects of banking involves putting people's money (and pensions) in the market at risk to the investor, really no financial risk of the banker exists.

When money is made on the return of the risk, the bankers have set up a system where they make a real return and get their money which is usually huge. The investor that is the risk taker gets a return that is usually on paper except they take the money out instantly at that point. The banker that has no risk (except reputational risk) makes a killing.

On the other hand, if the market crashes or wains a year later, they have already taken their share which is the real money part of the profit bundle but left the investor with the part wey oyinbo dey call "chimera". If money is lost, the bank has not lost a penny of its money as it has taken no risk with its money, is not going to be penalised for losing money and the investor takes 100% of the hit as the risk was 100% with its money.

wait, is this your understanding of how bankers make money?
make money on paper, take cut and leave the paper profit for the investors?

is that it?

welcome on board
i expect first class insight oh so pls don't shy away. i trust u anyway

tkb417:


wait, is this your understanding of how bankers make money?
make money on paper, take cut and leave the paper profit for the investors?

is that it?

In the markets, that was what happened in the credit crunch.

The bankers had made a profit/bonus and the investors were left with a chimera.

jay bee:

welcome on board
i expect first class insight oh so pls don't shy away. i trust u anyway

i dont get the drift
why they are huge bonuses?

first thing, are you asking the the moral justifcation/ethical balance of the rewards or you think they dont do as much as they earn?

lemme get it clearly

jay bee:

I now understand where u r coming from.
But isn't that the main reason why the investment house are legally required to have readable and printable disclaimers (All investments involve different degrees of risk. You should be aware of your risk tolerance level and financial situations at all times) ?

People know that the value of their respective initial investments aren't guaranteed but still go for it cos of greed and thirst to get reach.

I'm sure you've read the article about Islamic banking (the pros and cons of it)?

Why do you think people will still want to invest in berkshire hathaway today despite the shares being the most expensive? They have a track record of having year on year increase on initial investment and i'm sure the analysts under warren's payroll will be getting bountiful bonuses yearly as well (maybe in the form of shares sha)

I am only ever sympathetic to people that have their live savings wiped away due to unauthorised investment actions on their behalf.
The case is similar to a lawyer getting paid regardless of winning or loosing a case.
By law you have the right to represent yourself but we generally do otherwise to allow the best in the business to represent us so as to have a favourable outcome

Yep, that is a valid point.

But most people are not financially knowledgeable to be frank and even those of us that are, can't be bothered to read such long and lengthy legal jargons. How many times have you read the warranty on the products you buy?

Another thing is that they have limited options of where to invest their funds hence these banks have supplier power, have no real socially moral responsibility like Doctors and the investors mostly just have to use them.

In dynamics like this, it is not unknown for governments to protect the customer in other industries, so is it time to apply consumer protection to the banking industry?

Sagamite:

In the markets, that was what happened in the credit crunch.

The bankers had made a profit/bonus and the investors were left with a chimera.

Wrong, it's a lot deeper than that.
What's the percentage of the bonus taking compared to the debts incurred by companies during the credit crunch? a guesstimate should give me in the region of less that 5%

Your LB collapsed because they invested heavily in complex financial instruments that was introduced during the greenspan era (bad loans from sub-prime mortgages) believing that it's a zero risk market risk as they will always be a market to churn toxic debts to.
Oil was at an all time high and the consumer confidence which generally underpins and inturn drive market was at an all time low hence creating a scenario where people preferred to save rather than spend.
the regular high street shops and small business not having customers, they not being able to service their respective loans, assets being overvalued cos of the boom then having to be readjusted to balance the books.

Sagamite:

In the markets, that was what happened in the credit crunch.

The bankers had made a profit/bonus and the investors were left with a chimera.

sagamite
haba, what are you saying?

pls detach the bankers from the market and lets start from there

when the markets crash, what do you think is crashing? the banks of course

where i work, people have been sacked, the top mgt cannot be paid, the company is exposed to bad instruments/debts, illiquid cos of so much exposure to the same market ure talking about

how do you reconcile this?
when the market crash, the bankers cannot eat

check the risk reward ratio of these payments and u'll understand what im saying
i get paid bonuses for deals i make for clients, i dont get cuts from paper profits like u said and of course if i help clients in raising 500 million in a year, then it makes sense to get 50,000 in bonus at ma level

so whats the wahala saga

tkb417:

i dont get the drift
why they are huge bonuses?

first thing, are you asking the the moral justifcation/ethical balance of the rewards or you think they dont do as much as they earn?

lemme get it clearly

I am saying you guys are conmen!  

No, joking, what I am saying is that I really don't see the exceptional work that is being done or risk being taken to be worthy of the huge sums in most aspects of banking. But unfortunately, the industry structure and lack of social responsibility enables them to make such money. It even enables them to hide failure under short term gains by which time they would have been rewarded for success.

Doctors that are experts and geniuses that do more incredible and meaningful work can not easily charge mega-bucks as their is a social responsibility and the structure of the industry means most have to work as civil servants and the quality of their work is hard to quantify.

Sagamite:

Yep, that is a valid point.

But most people are not financially knowledgeable to be frank and even those of us that are, can't be bothered to read such long and lengthy legal jargons. How many times have you read the warranty on the products you buy?

Another thing is that they have limited options of where to invest their funds hence these banks have supplier power, have no real socially moral responsibility like Doctors and the investors mostly just have to use them.

In dynamics like this, it is not unknown for governments to protect the customer in other industries, so is it time to apply it to the banking industry?

so what are we saying?
if supplier power is hgh, then it makes sense for them to dicatate the tune
thts just the koko; if youre broke, dont even try to fix it

Sagamite:

I am saying you guys are conmen!

No, joking, what I am saying is that I really don't see the exceptional work that is being done or risk being taken to be worthy of the huge sums in most aspects of banking. But unfortunately, the industry structure and social responsibility enables them to make such money. It even enables them to hide failure under short term gains by which time they would have been rewarded for success.

Doctors that are experts and geniuses that do more incredible and meaningful work can not easily charge mega-bucks as their is a social responsibility and the structure of the industry means most have to work as civil servants and the quality of their work is hard to quantify.

lol
conmen? i dont know about that
we are service providers

and how do you measure how what the doctors do are more credible and meaninful than what the bankers do?
without the banks, how will the doctors survive?

whoever is in the art of wealth creation will definitely be wealthy. The bankers are in the business of making money for you and i, and it can only make sense if they are true representatives of the wealth they are creating

jay bee:

Wrong, it's a lot deeper than that.
What's the percentage of the bonus taking compared to the debts incurred by companies during the credit crunch? a guesstimate should give me in the region of less that 5%

Your LB collapsed because they invested heavily in complex financial instruments that was introduced during the greenspan era (bad loans from sub-prime mortgages) believing that it's a zero risk market risk as they will always be a market to churn toxic debts to.
Oil was at an all time high and the consumer confidence which generally underpins and inturn drive market was at an all time low hence creating a scenario where people preferred to save rather than spend.
the regular high street shops and small business not having customers, they not being able to service their respective loans, assets being overvalued cos of the boom then having to be readjusted to balance the books.

Exactly my point.

The bulk of investor returns (if not cashed immediately) is left in the markets. The bankers take real money they can spend instantly, it is not something they can lose once it hits their account.

Now take investors A-Z, if their bankers tell them that the have made between £2 - 5m each, that is just paper to most of them because the minute Investors A-G cash in on their returns, the value of investors H-Z returns would diminish rapidly as the market is flooded with supply. This does not affect the £300K the banker has taken as their cut, real money, as 5% charge of the "profits" made for A-Z.

tkb417:

sagamite
haba, what are you saying?

pls detach the bankers from the market and lets start from there

when the markets crash, what do you think is crashing? the banks of course

where i work, people have been sacked, the top mgt cannot be paid, the company is exposed to bad instruments/debts, illiquid cos of so much exposure to the same market ure talking about

how do you reconcile this?
when the market crash, the bankers cannot eat

check the risk reward ratio of these payments and u'll understand what im saying
i get paid bonuses for deals i make for clients, i dont get cuts from paper profits like u said and of course if i help clients in raising 500 million in a year, then it makes sense to get 50,000 in bonus as ma level

so whats the wahala saga

That is why I have been careful with my choice of words. I said "aspects" of banking. I take it you are in M&A or Corp Finance where a majority of the revenue generated is real.

In regards to losing jobs, if you pay me between £500K and £2m as salary plus bonus for 4 straight years and then sack me, I can guarantee you that I will run to TB Joshua and ask for him to bless you.  

I believe they deserve their 'multi-million pound pays' as you have put it, in some ways.

These bankers are under immense pressure to deliver. Their job is at stake on all levels if they are not efficient enough.
They are measured on performance and their influence/impact on the profitability of the organisation.
Their reputation is at stake here.

If you are going to get a job in the financial sector now, the most important criteria employers are looking for is how you have increased sales/profit margins in your previous employment. And these margins better be meaningful ones.

Like someone already said, if I helped a company make a huge sum of money, then I should be expecting a certain percentage cut out of it.

tkb417:

so what are we saying?
if supplier power is hgh, then it makes sense for them to dicatate the tune
thts just the koko; if youre broke, dont even try to fix it

tkb417:

lol
conmen? i dont know about that
we are service providers

and how do you measure how what the doctors do are more credible and meaninful than what the bankers do?
without the banks, how will the doctors survive?

whoever is in the art of wealth creation will definitely be wealthy. The bankers are in the business of making money for you and i, and it can only make sense if they are true representatives of the wealth they are creating

chamotex:

I believe they deserve their 'multi-million pound pays' as you have put it, in some ways.

These bankers are under immense pressure to deliver. Their job is at stake on all levels if they are not efficient enough.
They are measured on performance and their influence/impact on the profitability of the organisation.
Their reputation is at stake here.

If you are going to get a job in the financial sector now, the most important criteria employers are looking for is how you have increased sales/profit margins in your previous employment. And these margins better be meaningful ones.

Like someone already said, if I helped a company make a huge sum of money, then I should be expecting a certain percentage cut out of it.

No doubt.

But it is not uncommon for government to protect consumers in such situations that is why there are laws like Usury laws, consumer protection acts etc.

I would just be more comfortable if banks shared the risk to justify their huge bonus or if their bonus is somehow linked to the continuum risk their investing customers face.

Investors are not protected much as the have limited and fragmented voice. Investment managers make their own money most times irrespective of returns as they have a annual management charge (AMC) of funds under management (FUM) which are in billions. The bigger the FUM, the more influence the fund manager has on bankers but also the bigger the AMC to not bother. So their incentive to fight bankers for return is diminished as the voices that matter (the big fund managers with huge FUMS) are already making a killing.

Honestly the industrial structure is too balanced towards the bankers, hence they make the killing that I feel is not justified in some cases.  

The Conmen (bankers) make money from cut, the intermediary Pi-mp (fund manager) makes money from AMC, the Godfathers (government) makes money from tax and the girl (pensioner) is ra-ped for little returns despite being the one facing AIDS (bearing majority of the risk). 

Sagamite:

The Conmen (bankers) make money from cut, the intermediary love-vendor (fund manager) makes money from AMC, the Godfathers (government) makes money from tax and the girl (pensioner) is despoiled for little returns despite being the one facing AIDS (bearing majority of the risk).

lol
i don tire for u

Sagamite:

No doubt.

But it is not uncommon for government to protect consumers in such situations that is why there are laws like Usury laws, consumer protection acts etc.

I would just be more comfortable if banks shared the risk to justify their huge bonus or if their bonus is somehow linked to the continuum risk their investing customers face.

Investors are not protected much as the have limited and fragmented voice. Investment managers make their own money most times irrespective of returns as they have a annual management charge (AMC) of funds under management (FUM) which are in billions. The bigger the FUM, the more influence the fund manager has on bankers but also the bigger the AMC to not bother. So their incentive to fight bankers for return is diminished.

Honestly the industrial structure is too balanced towards the bankers, hence they make the killing that I feel is not justified in some cases.  

I agree but that's because they have the supply power.
Customers do not have much of a choice here. Unless you've built a cupboard as your bank where you keep your money
When you get a loan from the bank, where do you think the money is coming from?
These banks do share some risks aswell, the amount they lose on bad debts alone is very alarming.

Sagamite:

The Conmen (bankers) make money from cut, the intermediary love-vendor (fund manager) makes money from AMC, the Godfathers (government) makes money from tax and the girl (pensioner) is despoiled for little returns despite being the one facing AIDS (bearing majority of the risk). 

Manmustwan.kwack

While we are still on the topic of sharing the risks involved, do you think the average man is prepared to share the burden of having to be at work more than 12 hrs a day sometimes 6days a week?
The constant HBP and enormous stress of having to always deliver?

Some of my friends have always asked me why i've never gone into IB industry and my answer to them as always been i'm very comfortable with earning far more than i work for. Just come and check how we roll in public sector

jay bee:

While we are still on the topic of sharing the risks involved, do you think the average man is prepared to share the burden of having to be at work more than 12 hrs a day sometimes 6days a week?
The constant HBP and enormous stress of having to always deliver?

Some of my friends have always asked me why i've never gone into IB industry and my answer to them as always been i'm very comfortable with earning far more than i work for. Just come and check how we roll in public sector

hehe
maybe in UK

come check how we do our thingy in Las Gidi; forget the long hours bro
our offices are "padded" and u can be rest assured ure home away from home

we love to work and get paid

jay bee:

While we are still on the topic of sharing the risks involved, do you think the average man is prepared to share the burden of having to be at work more than 12 hrs a day sometimes 6days a week?
The constant HBP and enormous stress of having to always deliver?

Some of my friends have always asked me why i've never gone into IB industry and my answer to them as always been i'm very comfortable with earning far more than i work for. Just come and check how we roll in public sector

I maybe off the tangent here, how u gonna be a rich man this way?

NobiGod:

I maybe off the tangent here, how u gonna be a rich man this way?

He said he's comfortable.

he drives a range

NobiGod:

I maybe off the tangent here, how u gonna be a rich man this way?

Do you know how much i earn?
PS. I don't work for Nigerian Government
What makes you think i ain't rich with what i'm earning at the moment? shior