Hull University Business School Column: Should financiers be banking on a bonus?
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By Professor Ros Haniffa, chair of Accounting and Finance, Hull University Business School BANKER bonuses have once again come under the spotlight, with opinions varying wildly. From a belief that bonuses are vast sums of money to hand out to bankers following the dramatic bail out of the global financial system by taxpayers, to those who claim that the UK banking system will suffer if bankers choose to emigrate to other countries, this debate is set to rumble on and on. With money in such short supply for SMEs nationally and at a time when people are losing their jobs and homes, many find the often impressive size of banker bonuses difficult to reconcile with our sensibilities and sense of common good. Whatever one’s opinion, it is clear that a huge chasm exists between what the bankers think they deserve and what society at large feels is justifiable. Although banks are being forced by regulators to defer a larger proportion of the bonuses to be paid in shares or debt instruments, such as ‘contingent capital’ bonds or Co-Co bonds which is currently being considered by Barclays, the net effect in the eyes of the public is still the same. It is not only excessive but also a risky strategy. The level and consistency of bankers’ bonuses calls for the upper echelons in the financial services industry to review the reward strategy in the boardrooms to stave off criticisms at their excessive greed. The overall impact of bankers’ bonuses on the economy and society has to be considered by the elites that manage businesses in this sector. With the growing groundswell of discontent accompanied by ministerial calls for restraint, there seems to be little choice for the future but to return to the tenets of good governance, clear accountability and social justice. Educational institutions can play a vital role in providing this ethical focus. At Hull University Business School, we know that we have a duty to prepare the business leaders of the future for the complex and interconnected world we have been left with since 2008. It is no longer enough for graduates to learn disconnected technical knowledge and skills in the classroom – our graduates need to learn how to work in a professional and ethical manner and incorporate responsible and accountable leadership into their career goals. With this in mind, the business school introduced a new MSc in Money, Banking and Finance in 2010, which focuses on the positive impact graduates can make in the critical area of global finance, emphasising areas such as corporate governance, risk management, ethical dilemmas and decision making, while ensuring students learn from previous national and international economic and political mistakes and scandals. At the end of the day, bonuses should be paid for outstanding performance, not purely for retaining talent. Banks pay premium remuneration packages when recruiting talented bankers, consequently the onus is on the bankers to continuously perform to expectations in order to justify their bonuses. If football clubs are willing to let go of talented players who are no longer star performers, shouldn’t banks do the same instead of glorifying the once talented but now poor performers at the top? If the big four banks follow through with their threats to leave London and move to other, less regulated financial centres, this will have big repercussions for the UK economy as we are highly dependent on the financial services sector. However, although there is a huge market demand for talents outside the UK, the global economic climate cannot continue with the current reward system – if bankers are not prepared to make the necessary changes themselves they may find that the beleaguered public will force change upon them Hull University Business School provides a range of short courses, including executive education in logistics and systems thinking. For more information on education programmes, contact +44(0)1482 347500 or businessschool@hull.ac.uk . More articles in
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