I have long questioned the implementation of incentive remuneration or performance related pay (PRP.) But I have to confess to being shocked by the brazen effrontery of the banking industry demanding bonus payments despite their disastrous performance and its impact on everyone else. With reports that industry bonuses in London City for 2007 alone were £15 billion, you would think they would recognise the gravy train had come to an end and simply be grateful for what they have already received.
Instead, as reported on the BBC news this morning, we have these people engaging lawyers to legally pursue their contractual rights to their bonuses! This is something that even the hardiest satirist might have had difficulty imagining. Now we know for sure – the world has gone mad! Moral standards have sunk to unprecedented depths.
'Bonus' and 'legally enforceable' are almost mutually exclusive terms. Ignoring the fact that bonus is literally the Latin word for good, my dictionary gives as its first definition, "A sum of money added to a person's wages for good performance." Surely leading a company to the point where it requires a multi-billion pound bailout from the taxpayer precludes any possibility of there having been good performance? So how can there be any legal right?
Let's go back to my starting statement: a bonus is an element of incentive remuneration or PRP. Consequently a bonus right can only exist if and when:
1. The organisation's performance itself is good.
2. The individual meets the criteria of good performance upon which the bonus terms were set.
That first point is important: it is no good saying this part of the company has done well so they can have a bonus, but this division hasn't, so they can't! Organisational performance here clearly indicates there should be no bonus entitlement.
This sorry episode, however, clearly indicates that it is time to do away with 'incentive schemes' where there are no true incentives, and which are actually nothing more than the means to increase salaries by the back door. If the shareholders do not get any return when the company makes a loss why should the people get any more than their basic salary? The time has come for the 'labour dividends' that we propose. Then no-one will be able to bank on bonuses, least of all the bankers!