Only a few days ago the part nationalised, RBS (Royal Bank of Scotland) were considering paying employees over £1 billion in bonuses.
The UK government recently acquired a 70% share of RBS when they invested £20 billion in the bank. Understandably the public were outraged when the bank announced that they were considering paying over £1 billion in bonuses. RBS made huge losses during the financial year and had to be bailed out by the government. So the issue was raised why reward people for failure?
To put this into perspective the previous year’s bonus pool is estimated to be almost £2.5 billion, although the economy was very strong during this period. Some people deserve to be paid bonuses due to terms in their contracts or where they can prove their performance directly led to profit.
The problem is paying bankers discretionary bonuses, when the company has made substantial losses during the financial year.
RBS have now informed the public that they will only pay bonuses where they are contractually obliged, this equates to roughly £175 million in bonuses.
It appears that public and government pressure has forced RBS to do the right thing by the public. Banks that have accepted government support are under greater pressure to drastically lower this year’s employee bonus payments.
RBS are also restructuring future employee bonus payments and reviewing remuneration for bankers.
Do you think banks will pay more realistic bonuses in the future?