The subject of employee bonuses at banks is getting a LOT of press right now… Right in the center of the media’s cross-hairs are the reports of Merrill Lynch’s end-of-year payouts, totaling in the billions, at the same time that they (and their future parent company, Bank of America) were receiving large payouts from the federal government’s bail-out programs.
Yes, the timing is awful, and it’s not a great mental image. Just like the public outrage over Citibank’s planned purchase of a corporate jet… But like that scenario (where they were also selling several of their existing jets to consolidate their fleet and buy one new one, and thus not simply using the bailout money to buy a nice new toy), the reality is a lot more complicated than the general public seems to be aware.
Bonuses are, by their very nature, expected to be unpredictable. In the four years that I’ve been working for a bank, every year when it’s time for my “here’s what you’re going to get” discussion with my manager, it’s prefaced with a reminder that bonuses are never guaranteed, that the amount is based in large part on company performance, and that employees should never count on receiving a bonus at all.
That’s all well and good, but the fact remains, bonuses are a big part of the total compensation plan. My “target” bonus, or the amount I should look for if the company does well and I’m performing well, is roughly 15% of my total annual compensation. That’s a BIG CHUNK. And my compensation is structured much differently than lots of people; many earn much more in annual bonus than they do in total “regular” paychecks.
So yes, a lot of people are upset that banks are paying these bonuses, but the flip side is that banks can realistically expect to lose employees in large numbers if they stopped paying bonuses. The counter-argument to that is that these are the same employees who got the banks into these messes in the first place.
On the other hand, you’ve got to consider that a LOT of bank employees — myself included — had nothing to do with the fiascos of mortgage-backed securities that are crippling banks’ balance sheets lately. At this moment, I STILL don’t know what annual bonus I’ll be receiving, if any, and I’ll be selfishly upset if I don’t get one because of the widespread failure in other parts of the bank. I still did my job throughout the year, damn it, and the bonus structure was a big part of what attracted me to this job.
In the end, though, it all comes back to this… I’m lucky to still have a job. And if I get any bonus — which I expect I will, even if it’s a fraction of what I was hoping for — it’ll be a nice surprise at this point. Earning a paycheck is a hell of a reward these days, so you can bet I will smile broadly and say, “Thank you!” no matter what it turns out to be.
All I’m asking is, when you read about these bonuses, look for the details about who’s being discussed. Many people in the banking and real estate fields did stupid things in 2008, but let’s be careful that we don’t overly penalize everyone else in the industry because of it.