No longer. Compensation in financial services firms is now headline news.
Following Barack Obama's lead in capping bonus payments for banks receiving US government support, the UK government is also now seeking to impose pay restraints across large parts of the banking industry.
This isn't something that any of the UK's main political parties would have contemplated last September, but the public's revulsion of rewards for failure is so acute, it's no longer an issue that can be ignored.
Of course, the perception that the gap between rich and poor is too wide has been growing for some time. But it's also clear now that the gap isn't just wide, it's also unjustified - and has been one of the major contributors to our current problems. And it's not helped by John Thain spending $1.2m on his office renovations, including the famous $1,400 waste basket, as Merrill Lynch went to the wall.
Barclays, which is to pay bonuses of about £600m has been relatively unscathed, but then it has earned profits of close to £6bn and is cutting bonuses by 50-60% and has announced its own top-level review of its bonus structure.
RBS is going to have a much tougher week. The UK's prime minister, Gordon Brown, has already said that he is “angry” that the part-nationalised bank, which has made a £28bn annual loss, is preparing to pay out £1bn in bonuses.
The bank argues that it needs to make these discretionary payments to retain its best staff. In the main, this is a red herring - few other banks are recruiting, although there will always be a demand to talent, and Josef Ackermann at Deutsche Bank has noted, for example, that "talent will be happy to work for us".
The bank also has contractual obligations to pay some bonuses. However, it is possible to argue that the bank basically went out of business when it was taken over, and that without state funding employees wouldn't even have a job, never mind a bonus (see for example, former deputy prime minister, John Prescott's Facebook campaign).
Of course, most people still understand that an average bank teller has had little to do do with financial malpractices, and that therefore, they should still receive a bonus. But bearing in mind the above points, these should probably be reduced.
We'll have to wait and see what happens... legal issues may yet stop the government from making any changes, although they may find a way to override these obligations.
But the bigger issue is how we ensure bonus schemes are better designed. It's been announced that both Citigroup and UBS are writing clawback provisions into staff contracts so they can recoup large bonus payments if business performance suffers. What? - how on earth weren't these provisions included before now?
HR should never have let this situation develop. And it's not just an issue of compensation design. Some banks have refused to see their people as purely money motivated, but most have simply accepted their people are only engaged by high rewards, have offered these rewards, and have continued to recruit people who are motivated in this way.
A few recent comments in the news help to show how accepting and reinforcing this link has led to a situation in which bankers see high reward as a right, regardless of their business' contribution:
- On the BBC news: "I deserve my bonus - I've worked hard for it - after all, I only earn £95,000."
- In the Sunday Times: a Morgan Stanley banker who last year was "paid a bonus of only £2m" now "feels unfairly treated as the bank makes across-the-board cuts, no matter how individual have performed... 'The contract has been broken,' he said".
I think these comments show how far bankers' perspectives have become divorced from the public's.
John Hollon at Workforce Management sums the problem up well, discussing Wells Fargo CEO John Stumpf's full-page ads in The New York Times, The Washington Post and The Wall Street Journal:
"Regular Americans believe that Wall Street bankers are largely responsible for the financial mess the country is in right now. Whether that perception is right or wrong, Stumpf and his CEO friends need to buck up, shut up and be more sensitive to how their business practices might be perceived by the folks on Main Street. This is hardly the time to defend business as usual, no matter how legitimate it might ultimately be."
But it hasn't had to be like this - there is no real reason why bankers need to be paid more that other sectors of the economy. Not all talented people are money motivated and it's a shame that none of the banks ever looked outside this one stream of employees (leaving aside for a minute the question of whether they really needed talented people anyway ie whether less talented people may have taken more acceptable risks?).
The key for me, as I've posted before, is the banks' cultures. Financial services firms need to offer their people a broad and balanced (financial and non-financial) EVP based on a compelling purpose (mojo) which is supported through HR practices including leadership development and succession planning etc.
So, it's going to be another interesting week. Tomorrow, former CEO of RBS, Fred Goodwin (who left the bank with a £8.4m pension pot) will be grilled by MPs on how he led the bank to the edge of collapse.
But given that these are HR issues in the spotlight, where is the HR response on this (from the CIPD, SHRM etc)?
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