CorpComms Magazine

Andrew Hayes, Chief executive, Hudson Sandler

With public sentiment so much against bankers and bonuses you cannot expect to change opinion overnight and nor should you attempt to. The best to hope for it is to neutralise any negative comment on bonuses.

The issues are simple but the response is not necessarily rational. They relate to greed, government bail-outs (why should bankers make so much money in this economic climate when taxpayers saved their jobs?) and the politics of envy. For politicians there are no votes in defending bonuses. Witness Boris Johnson's recent U-turn on the subject.

The stance to take depends on whom you are acting for. The UK and US banks are very different, but have been linked together. It is essential to explain the circumstances and the issues.

If your client is a US bank, then it is vital to highlight that it has not been bailed out by the UK taxpayer but is, instead, a major contributor to maintaining London as a global financial centre - one that is the envy of the rest of the world. We need to keep these banks in the UK. They are important for the economy. They could pay less tax by locating in other centres but choose to be in London. These banks pay UK corporation tax while their employees also pay tax on their bonuses, boosting the Chancellor's coffers - at a time when he needs all the funds he can get.

Bonuses are not paid for the sake of it. They are paid out of profits. Banks need the best brains, and to attract the best in a competitive market it is necessary to pay them well. Investment bankers work in an industry notorious for lack of security and loyalty. They are easy targets. But not all bank employees made mistakes in recent years. Most are money-makers for their employers, otherwise they would not be in line to be paid bonuses.

Deborah Saw, Managing director, corporate practice, Citigate Dewe Rogerson

It must seem extraordinary to the man or woman on the street that, when they are told that the recession in the UK is the longest since records began and when they know that they (as taxpayers) have poured £1 trillion into saving the banks, there is even the slightest suggestion that the people they think started all the problems are going to get hefty bonuses.

The supporters of the bonus culture have not helped, either. Having Prince Andrew tell you that bankers' bonuses are minute must cue the response in comparison with the Royal Family's wealth. And Gordon Gecko appears to be alive and well in EC3 as Lord Griffiths, vice chairman of Goldman Sachs, preaches from the pulpit of St Paul's Cathedral that we have to accept that inequality is a way of achieving greater opportunity and prosperity for all. With friends like these, bankers don't need enemies.

So is there any mitigation for bankers and why have they been so passive in the face of the torrent of invective that is poured on to them? Doubtless they have been very active in lobbying politicians and regulators. But as far as politicians (only months away from an election) are concerned, it's the voters that count.

The banks should be reminding us that the UK financial services industry is still a major employer and a vital contributor to tax revenues. It is recognised as one of the few sectors where the UK is world beating.

But the banks have to be more transparent about their remuneration strategies. The global economic crisis had its origins in the risks bankers took and the rewards they got for taking them. It is critical that the banks now reveal clearly through the media and to their many vociferous critics how they will pay bonuses. The cash bonus has gone the way of the Dodo.

Banks are full of people who are meant to be super-smart. It's about time they showed they are using some of that immense brainpower to devise a remuneration system that recognises that they have responsibilities to more than themselves. It can be done. Credit Suisse has publicly announced its new bonus system and was the first bank to comply with the G20 reforms. But for other banks being dragged kicking and screaming to do something that protects not only your corporate reputation, but gives you a moral advantage rather than moral hazard, does not seem to be good business.

John Antcliffe, Chief executive, Smithfield

The days when Lord Mandelson said that he was 'intensely relaxed about people getting filthy rich, as long as they pay their taxes' now seem a long time ago.

The general public understandably feels let down by the financial services sector. This is reflected in the widespread criticism of the City by the media and many politicians, and any London-based investment bank announcing bonus payments to staff will be doing so against that backdrop.

Bonuses will, however, continue to be paid and among the points that investment banks should consider making when discussing these are the following:

• Notwithstanding the excesses that have taken place, the financial services sector represents just under ten per cent of the UK's gross domestic product and pays billions in taxes to support Government spending;
• The City is a vital asset to the British economy.  We live in a competitive world and if London becomes an unattractive place in which to work, some people will leave;
• Whilst a small number of people have been guilty of poor judgment and unacceptable risk taking, tens of thousands of people in the City at all levels continue to work hard and deserve to be fairly rewarded;
• Going forward, bonuses should be paid over several years and form part of a structured remuneration package that is linked to long-term performance and value creation;
• No-one should be rewarded for failure or inappropriate risk taking.

More generally, the City has not in recent years devoted as much time as is necessary to explaining its role and economic importance.  Instead, a perception has built up in some quarters that the City is an exclusive club for a privileged few.  This is not the case: the City has never been more meritocratic and unless more firms, including investment banks, engage more fully, current criticism and misunderstanding will, sadly, continue.  

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