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Why Bonuses Should Be Abolished


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When an investment banker starts the year they expect to earn £5m (for arguments sake). This explains why they are so enraged to lose their bonus, something many on here didn't get to grips with. If you just paid them the basic they wouldn't do the job at all.

Yes, I'm sure that were they only paid a flat salary of, say, £250k, they'd just walk out and into a job paying £5m instead.

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Simply not true, and my first post which you perhaps missed the point of explained that a study into rewards for extra achievement is not applicable to what is effectively a discretionary remuneration environment like Investment Banking.

When an investment banker starts the year they expect to earn £5m (for arguments sake). This explains why they are so enraged to lose their bonus, something many on here didn't get to grips with. If you just paid them the basic they wouldn't do the job at all.

:D

Utter cobblers.

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A: I'm not talking about an admin on a sub-national average salary as I am sure you know. I am talking about just about every other senior manager or exec in just about every other organisation in the country, and the processes used to select them and manage their performance.

The money involved in most senior positions is a lot less than what an investment banker might make, so the comparison to a senior role or junior one is just as valid. The amounts involved are far higher, so the remuneraton has to be based on real performance not on the hope of performance with "capability management" the threat if they fail.

You might say the amounts shouldn't be higher, but if someone earns their company millions then market forces will drive up their expectations of remuneration.

B: How dare you compare some city spiv to someone who has to make life and death decisions. As to life and death decisions, long hours and stress for very little money, lets start with a humble squaddie over in Afghanistan as an example, shall we?

I think your vitriolic use of the phrase "city spiv" makes your arguing this point redundant. I would suggest that to you this isn't about effective remuneration it's about "Banker bashing and how all bonuses should be banned!!! That'll learn 'em!!! Ha! Where's my Socialist Worker?"

Anyway, that aside, what's your point re. squaddies? As much as I have enormous respect for what the boys in Afghan achieve I don't think you can compare the decisions squaddies have to make to those of investment bankers in respect of the cerebral input required and I don't think you can create the camaradery and shared sense of duty and overcoming adversity in an office in Canary Wharf.

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Simply not true, and my first post which you perhaps missed the point of explained that a study into rewards for extra achievement is not applicable to what is effectively a discretionary remuneration environment like Investment Banking.

It applies directly. You reward people hugely and they make a balls of it compared to if you pay them averagely.

When an investment banker starts the year they expect to earn £5m (for arguments sake). This explains why they are so enraged to lose their bonus, something many on here didn't get to grips with. If you just paid them the basic they wouldn't do the job at all.

Possibly, though there aren't many places to go for the same rewards - but lets be charitable and say someone else would - they would do a better job of it.

Simply - the more you pay people per task performed, the worse they perform at that task.

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Yes, I'm sure that were they only paid a flat salary of, say, £250k, they'd just walk out and into a job paying £5m instead.

If you pay someone £250k and they earn £100m for their company then someone else will pay them £300k to do the same for them instead. And then someone else will then pay them £400k. It's all market driven.

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The money involved in most senior positions is a lot less than what an investment banker might make, so the comparison to a senior role or junior one is just as valid. The amounts involved are far higher, so the remuneraton has to be based on real performance not on the hope of performance with "capability management" the threat if they fail.

You might say the amounts shouldn't be higher, but if someone earns their company millions then market forces will drive up their expectations of remuneration.

Obviously not the case if the experiment results are valid. If people paid less perform better, then the market will remove the highly paid due to relative uselessness.

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Simply - the more you pay people per task performed, the worse they perform at that task.

Simply and obviously incorrectly. By extension if you pay everyone the minimum wage (or scrap it, pay everyone nothing) we'll have the most world-beating productive economy in existence! Drivel.

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If you pay someone £250k and they earn £100m for their company then someone else will pay them £300k to do the same for them instead. And then someone else will then pay them £400k. It's all market driven.

But you won't pay them that if every time you increase the pay, performance reduces.

Which is what the results show.

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Simply and obviously incorrectly. By extension if you pay everyone the minimum wage (or scrap it, pay everyone nothing) we'll have the most world-beating productive economy in existence! Drivel.

Actually you are right, if you removed monetary rewards you would gain maximum effeciency.

This was Smiths argument in the wealth of nations, and it's just as valid now.

Edit - in any event you are simply incorrect. The results are in, plain to see. Higher rewards = worse performance.

Edited by Injin
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If you pay someone £250k and they earn £100m for their company then someone else will pay them £300k to do the same for them instead. And then someone else will then pay them £400k. It's all market driven.

A person earning £100m for their company didnt do that on their own...only in the self defeated financial "trade" can that occur, and even then they are employed by savers to earn THEM something.

Its a team play, and the cleaners and typists are just as vital.

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Edit - in any event you are simply incorrect. The results are in, plain to see. Higher rewards = worse performance.

As we saw in practice when these self proclaimed masters of The Universe, who regard themselves as somehow more worthy than the mere mortals who actually produce the wealth off which they parasitize, crashed and burned in 2007.

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A person earning £100m for their company didnt do that on their own...only in the self defeated financial "trade" can that occur, and even then they are employed by savers to earn THEM something.

Its a team play, and the cleaners and typists are just as vital.

I think someone like Steve Jobs is an example of that being wrong. Someone with the right vision, someone who decides on the right action to take, can easily be responsible for profits in that without them the profits wouldn't exist. Does this sort of vision/decision making exist in investment banking? I don't think anyone posting in this thread including me is really qualified to answer.

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As we saw in practice when these self proclaimed masters of The Universe, who regard themselves as somehow more worthy than the mere mortals who actually produce the wealth off which they parasitize, crashed and burned in 2007.

Thanks for proving my point. Why did you waste time with an attempt at an argument? Surely "Bankers = Bad", perhaps in big colourful text, would have been just as eloquent.

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Actually you are right, if you removed monetary rewards you would gain maximum effeciency.

This was Smiths argument in the wealth of nations, and it's just as valid now.

Edit - in any event you are simply incorrect. The results are in, plain to see. Higher rewards = worse performance.

So if you remove monetary rewards how to people buy food and clothes and things? Is that provided by some central organisation? Is it "From each according to his abilities, to each according to his needs"?

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Actually you are right, if you removed monetary rewards you would gain maximum effeciency.

This was Smiths argument in the wealth of nations, and it's just as valid now.

Edit - in any event you are simply incorrect. The results are in, plain to see. Higher rewards = worse performance.

Bonus (2011) will be significantly lower than the boom years. And if you don't meet your performance target, you will be cut. It's ruthless.

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As we saw in practice when these self proclaimed masters of The Universe, who regard themselves as somehow more worthy than the mere mortals who actually produce the wealth off which they parasitize, crashed and burned in 2007.

Hence many lost their job in 2007/2008.

The mere mortals were debt fueled, and consumed beyond their means.

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So if you remove monetary rewards how to people buy food and clothes and things? Is that provided by some central organisation? Is it "From each according to his abilities, to each according to his needs"?

By the market.

Basically people do stuff automatically, if they are allowed to.

The market also tells you what money is once people follow their own star, unlike the present system. Of course you've read wealth of nations and know what I am talking about....

And I am glad you've stopped the argument about bonuses. It was rather silly to go on about how large rewards were needed or worked when the whole basis of the thread is controlled experimental evidence otherwise. :)

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Bonus (2011) will be significantly lower than the boom years. And if you don't meet your performance target, you will be cut. It's ruthless.

Plenty of evidence out there in behavioural economics that this approach doesn't work either.

High pressure, high reward environments are more or less the perfect way to mass produce ****** ups.

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...when the whole basis of the thread is controlled experimental evidence otherwise. :)

No it isn't, the whole basis of the thread is taking experimental evidence and jumping from that to "Bonuses should be abolished" and by extension "Bankers are bad and should be paid minimum wage/shot at dawn" depending on your level of lunacy.

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No it isn't, the whole basis of the thread is taking experimental evidence and jumping from that to "Bonuses should be abolished" and by extension "Bankers are bad and should be paid minimum wage/shot at dawn" depending on your level of lunacy.

Assuming the results are correct then yes, bonuses should be abolished.

Not by government dictat, but by shareholders seeking returns. Not just in banking, but anywhere you want better productivity.

Bankers are of course bad and should be in jail, all banking being fraud as it is, but that's a different subject.

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Real world anecdote. I was working for a team developing a F1 car. Critical path? Tick one. Stressful? Tick two. Cerebral? You bet, I would imagine way beyond investment banking. At the beginning, a meeting was held, and the question was mooted, "How do we motivate the staff?" (to work 90-hour weeks for no extra pay). Increase the pay? Nope. Bonus? Nope.

Fear was the tool decided upon. No performance bonuses, you were out if you underperformed or made a bad decision. I was later told that in this company of about 90 people (I was ushered out for putting my family first), there were two nervous breakdowns (one was my line manager) and a suicide.

As for the example of Steve Jobs in the thread above, Apple would be worth zilch if it wasn't for the quality of the engineering and product design. Jobs had little to do with that, he only provided the environment for that to happen, for which he was richly rewarded, but if one of his engineers c0cked up big time and scuppered the project, do you think he would get a pat on the back and a bonus?

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I think your vitriolic use of the phrase "city spiv" makes your arguing this point redundant. I would suggest that to you this isn't about effective remuneration it's about "Banker bashing and how all bonuses should be banned!!! That'll learn 'em!!! Ha! Where's my Socialist Worker?"

Hang on. You consider yourself a capitalist and people arguing that the shareholders, rather than the workers, should be entitled to the rewards for risking their capital as socialists?

What kind of mixed up world are we living in?

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I think it is an absolute dissgrace that people on here are calling for bonuses to be scrapped .

A nice Turkey at Christmas and a bottle of wine between workers and their company has nothing to do with anyone else.

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Having read the article I am not sure if people missed the point (or perhaps I did *shrugs*)

  • If the task is straight forward and/or procedural in nature, financial incentives for completing the task improve performance.
  • If the task is less straight forward and creative in nature, financial incentives reduce performance proportionally to the incentive offered.

So if you want someone to rinse and repeat something many times over, financial reward will work. This doesn't necessarily have to be a menial job, and can encompass some aspects of most professional professions be it, accountancy, engineering or powerpoint and presentation jockey. - I don't know what exactly an investment banker actually does all day, but it may well fall into this category.

If you need someone to think outside of the box or allow them to come up with and/or implement a solution to a problem (or define the problem) i.e. no cookie cutter outputs/one size fits all; then a financial incentive will hinder their performance. With the financial incentives in place performance i.e. deadlines, quality, quantity, profitability, suitability or other aspect of their work will be compromised.

Probably the easiest way to find which method works for you, would be to ask:

Do you like what you do or do you do it for the pay check?

To help answer that also consider - if all jobs paid the same, what job would you do? (within relatively normal realms available locally that is - heiress or millionaire playboy don't really count)

I suspect with some job roles, if you took two different people, one may be incentivised by target based bonuses, the other could be compromised by the same financial incentives - so it is not entirely clear cut.

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  • 433 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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