Shareholders in public companies have the same power as individual citizens in voting for a government: in theory they have all the power, practically they cannot do much. The fragmentation of the power of the decision makers is what keeps corrupt governments and company execs in power.
If you can’t get rich by making the business do better, plan B is making sure your bosses love you, no?
And who is going to make sure they do amazingly well in the interviews for a role like this but people who would have no problems making their bosses really love them?
>By law, Bankers should be paid no more than public officials
How would you intend to enforce this? Declare a law that no banker must be paid more than than the current highest government salary? Who defines a "banker"...does that same rule apply to the CEO?
I understand that Credit Suisse is a poorly-run and incessantly corrupt company, but many times, people suggest "hey, that should be a law!" without thinking it through.
> Declare a law that no banker must be paid more than than the current highest government salary?
No. Simply have a law that employees of a bank that has been deemed "too big to fail" will be regarded as public employees (which they effectively are) and are paid according to the BAT, the Bundesangestelltentarifvertrag, in Germany. Other countries will have similar official regulations as to how public sector employees are paid.
"Too big to fail" = "Too big to bonus"
> Who defines a "banker"?
Employees of a bank that has been classified as systemic, as too big to fail. If the risk is public, the pay is public. If you want private pay, your bank must be small enough that the public does not carry the risk.
> ..does that same rule apply to the CEO?
Of course. Especially to the CEO.
> ...without thinking it through.
Just because you haven't thought this through doesn't mean I haven't.
> Credit Suisse is a poorly-run and incessantly corrupt company
This isn't a singular problem of Credit Suisse. 2008 was just the same, only (so far) on a larger scale. I am usually extremely loath to declare simple/moralistic causes for what appear to be complex and systemic issues.
But in these cases, it really was that simple. The bankers knew that it was a sham. They kept the sham going because they wanted to get theirs before the music stopped. When the music stopped the public had to bail them out. And the bankers were still rich. Because profits were privatised and risk was socialised.
> How would you intend to enforce this? Declare a law that no banker must be paid more than than the current highest government salary?
Salaries of government employees and public officials are already dictated by laws in most countries, so this isn't like it is some sort of new area of legislation that doesn't have decades of legislation and case law for reference.
Sounds like what we have currently in the US. I have a family member who is a manager for a state unemployment department ... She oversees like a dozen reps that help handle unemployment claims. She makes $70/hr with a fully paid for pension + benefits and like 4-5 weeks PTO. Recently had a friend get laid off and filing for unemployment. Their queues have like 5-6 hour waits and you can schedule a follow up ... like a week in advance.
Sounds about right. I'm not sure what will ever change these agencies. Obviously paying them more won't, because they are very well compensated. Migrating systems/software? No, the government will pick Infosys or Cognizant, or some other nightmare consulting firm that'll charge $100 million per state. Imo, they need to be gutted from the top down.
So you want the entire set of public services run through private contracting firms instead who take 10% off the top for directors and another 10% for shareholders?
> The Swiss government has banned Credit Suisse from paying deferred bonuses awarded before 2022 in a move that has sparked more upset from staff at the failed bank
Maybe I am a bit suspicious due to what has happened in "high finance" for the past decade or 2, but that statement indicates to me it is the "regular" employees that will loose their bonus. What about the upper-level execs who probably have an employment contract. Will they loose to ?
Generally bank executives have aggressive clawback provisions in their contracts, far in excess of line employees. They often can even claw back already paid and delivered (and potentially spent!) money from quite some time back if there’s cause.
Clawing back line employees deferred comp is mean. Sarah in client confirms likely did her job just fine. She should keep her deferred comp.
I don't want to pile on the execs more, but I am suspicious of the "far in excess" number. In absolute terms, sure. Line workers probably don't have any clawback. But even after that clawback, I'm guessing the execs walk away fine?
I’m not familiar with CS’ structure but the ones I am senior Execs can have 10–15 years of comp clawed back. Line employees still have clawbacks but it’s usually narrower (3-5 years) and a much smaller percentage of comp (100% vs 10% for example)
Note the most serious clawbacks are for criminal behavior or extraordinary mismanagement. I doubt they’re invoking severe clawbacks at the extremes (100% for example)
Right, the clawbacks for criminal behavior honestly feel out of scope anyway. And most extraordinary mismanagement will fall under fraud, so is in that same bucket.
As such, I'm assuming we are not talking about 100% clawback in most cases. Such that even with the clawback I would expect to see, I'm also still expecting that they made way more money than line employees.
I'd be interested in peeking at the numbers, though. Neat topic.
It's probably not so much the existence of a contract, but the contents and specificity of any contract.
In the US, most employees below VP or director, will have very generic employment contracts. I've been at my employer for 20+ years and haven't signed a contract since I was hired, even through one merger and several PE acquisitions. I haven't signed anything about my normal salary either - they send me a notice every year when raises are granted and my reading it is treated as acceptance.
My bonus is loosely based on company financials, and subject to board and executive approval. As far as I know, the pay-out schedule isn't set in stone either. I have no doubt that if the company failed, I wouldn't see a penny of any unpaid bonus.
I'm not sure that's true for executives, who often have individual contracts with more specifics about bonuses, whether they be cash, stock, or something else.
Depending on the subset of banking you work in basically everyone is a VP because everyone needs that title in order to do their jobs without running afoul of the regulations. These people will have cookie cutter employment contracts if any.
Yeah, my comment was based on my experience in the software world. It's definitely true that there area lot of VPs of one variety or another at banks, even for individual contributors. Super weird, but it's been that way forever.
I've been told that the reason is because some subset of CEOs get offended at being shuffled off to a low ranking employee. So they get to meet VPs and are happy, without realizing where said VP really was in the org chart.
I don't know how true this is, but i was told it by my brother about 20 years ago, who at the time was a (low ranking) VP at a bank.
Ive only signed a couple of contacts ever, where the company really wanted it and were not forgetting.
I may be wrong but the offer letter is enough to insist your first paycheck and from there on in its obvious the company thinks you are an employee therefor subject to all employment law, most of which is about not changing the staus quo without due process. E.g. In the EU holiday pay cannot be lower than the previous 13 wk average doesnt matter what your contract says.
Employment law as far as i have seen in the UK (thanks to the EU) is all you are ever going to get anyway in any tight situation. Anything else in a contract is likely only gling to be an attempt to reduce that liability (which then in turn often invalidates the whole thing anyways).
UK law is common law, which is different from the civil law systems practised in continental Europe. Importantly, the theory of contract differs - in the UK anything can be a contract, provided there’s certain elements like an exchange (the legal term is consideration). This isn’t the case on the continent, where contracts must fit into prescribed types.
Working without a contract would be so utterly alien to the mindset here on the continent. If you don’t have a work contract, which of the seventy-four different pension schemes do you fall under? How do you register your new job with your mandatory “public” health insurance? What social security ‘status’ is recorded for you in the centralised national register of inhabitants?
I mean, I recently needed a notarised copy of my rental contract just to register my change of address with the government, which is mandatory here every time you move. This is not a system that deals well with “yeah, I don’t have any papers for that”.
It's very uncommon in the US too, and I'm having a hard time believing it could be true at a Fortune 500 company. Big companies go through all kinds of audits and certifications that would definitely require all employees to sign contracts and NDAs.
Employment contracts, especially for white collar work, are rare in the US.
Signing NDAs and acknowledging that you've read the handbook, while common, are not employment contracts.
Interesting. I've always at least signed an offer letter, which is a contract laying out what the job is, how much I'll be paid, specifying at-will employment, etc. I'm sure European contracts are more involved, but I don't think I would ever take a job without the employer at least agreeing to pay me in writing.
Pretty much every employee has a contract in Switzerland. It is a document that governs the relationship between employer and employee. Not sure how things would work without one. It’s a very standard practice. Source: I live in and own a company in Switzerland.
In Germany, there's no requirement for a written employment contract. The contract is formed implicitly if the employee keeps showing up for work, and the employer keeps paying them. Most employers use written contracts to override some legal defaults where this is permitted (e.g., symmetric notice periods instead of the default asymmetry favoring the employee). But the law is written in such a way that you don't necessarily have to do this.
tbh, according to another FT article [1], UBS plans to fire up to 1/3 of the combined 120k workforce, and announced previously the cuts will be pretty much all CS. So up to 40k employees out of 50k. So these deferred comps wouldn't be worth much to them for very long anyway.
I hope this applies globally and not only to Switzerland. The bonus structure is quite different between Switzerland and other countries some of which have very high bonuses payouts by CS.
I’m assuming that UBS has less agency to do it: if they do, they might run aground with the employment contracts. A government might have the authority to override those.
maybe/probably UBS said to the govt, "we'll take this bank over if you cancel all these payouts as part of the deal"
frequently in acquisitions/mergers/spinoffs, all the bad news is delivered before the deal so the new management can start fresh, and blame anything before on their predecessors.
So locking the stable door after the horses looted the barn and burnt it to the ground before bolting.
By law, Bankers should be paid no more than public officials.
https://www.tagesschau.de/wirtschaft/weltwirtschaft/credit-s...
How were shareholders OK with this? After all, top executives are still "just" employees of the real company owners - stock owners.
Credit Suisse paid a decent dividend [1]. Also, calling a spade a spade, the Saudis are this cycle's German landesbank: dumb money.
[1] https://ycharts.com/companies/CS/dividend_yield
And who is going to make sure they do amazingly well in the interviews for a role like this but people who would have no problems making their bosses really love them?
How would you intend to enforce this? Declare a law that no banker must be paid more than than the current highest government salary? Who defines a "banker"...does that same rule apply to the CEO?
I understand that Credit Suisse is a poorly-run and incessantly corrupt company, but many times, people suggest "hey, that should be a law!" without thinking it through.
By law.
> Declare a law that no banker must be paid more than than the current highest government salary?
No. Simply have a law that employees of a bank that has been deemed "too big to fail" will be regarded as public employees (which they effectively are) and are paid according to the BAT, the Bundesangestelltentarifvertrag, in Germany. Other countries will have similar official regulations as to how public sector employees are paid.
"Too big to fail" = "Too big to bonus"
> Who defines a "banker"?
Employees of a bank that has been classified as systemic, as too big to fail. If the risk is public, the pay is public. If you want private pay, your bank must be small enough that the public does not carry the risk.
> ..does that same rule apply to the CEO?
Of course. Especially to the CEO.
> ...without thinking it through.
Just because you haven't thought this through doesn't mean I haven't.
> Credit Suisse is a poorly-run and incessantly corrupt company
This isn't a singular problem of Credit Suisse. 2008 was just the same, only (so far) on a larger scale. I am usually extremely loath to declare simple/moralistic causes for what appear to be complex and systemic issues.
But in these cases, it really was that simple. The bankers knew that it was a sham. They kept the sham going because they wanted to get theirs before the music stopped. When the music stopped the public had to bail them out. And the bankers were still rich. Because profits were privatised and risk was socialised.
Fool me once, shame on you, etc.
See also: https://en.wikipedia.org/wiki/Moral_hazard
Salaries of government employees and public officials are already dictated by laws in most countries, so this isn't like it is some sort of new area of legislation that doesn't have decades of legislation and case law for reference.
But then all the experienced bankers will leave for another country. We can't not let them leave.
The government is already bad enough.
(No, this doesn't make any sense either)
If the risk is privatised, the profits can be privatised.
If the risk is socialised, the profits are also socialised.
Simples.
See: https://en.wikipedia.org/wiki/Moral_hazard
Maybe I am a bit suspicious due to what has happened in "high finance" for the past decade or 2, but that statement indicates to me it is the "regular" employees that will loose their bonus. What about the upper-level execs who probably have an employment contract. Will they loose to ?
Clawing back line employees deferred comp is mean. Sarah in client confirms likely did her job just fine. She should keep her deferred comp.
Note the most serious clawbacks are for criminal behavior or extraordinary mismanagement. I doubt they’re invoking severe clawbacks at the extremes (100% for example)
As such, I'm assuming we are not talking about 100% clawback in most cases. Such that even with the clawback I would expect to see, I'm also still expecting that they made way more money than line employees.
I'd be interested in peeking at the numbers, though. Neat topic.
In the US, most employees below VP or director, will have very generic employment contracts. I've been at my employer for 20+ years and haven't signed a contract since I was hired, even through one merger and several PE acquisitions. I haven't signed anything about my normal salary either - they send me a notice every year when raises are granted and my reading it is treated as acceptance.
My bonus is loosely based on company financials, and subject to board and executive approval. As far as I know, the pay-out schedule isn't set in stone either. I have no doubt that if the company failed, I wouldn't see a penny of any unpaid bonus.
I'm not sure that's true for executives, who often have individual contracts with more specifics about bonuses, whether they be cash, stock, or something else.
Such is life in an at-will state.
Depending on the subset of banking you work in basically everyone is a VP because everyone needs that title in order to do their jobs without running afoul of the regulations. These people will have cookie cutter employment contracts if any.
I don't know how true this is, but i was told it by my brother about 20 years ago, who at the time was a (low ranking) VP at a bank.
I may be wrong but the offer letter is enough to insist your first paycheck and from there on in its obvious the company thinks you are an employee therefor subject to all employment law, most of which is about not changing the staus quo without due process. E.g. In the EU holiday pay cannot be lower than the previous 13 wk average doesnt matter what your contract says.
Employment law as far as i have seen in the UK (thanks to the EU) is all you are ever going to get anyway in any tight situation. Anything else in a contract is likely only gling to be an attempt to reduce that liability (which then in turn often invalidates the whole thing anyways).
Working without a contract would be so utterly alien to the mindset here on the continent. If you don’t have a work contract, which of the seventy-four different pension schemes do you fall under? How do you register your new job with your mandatory “public” health insurance? What social security ‘status’ is recorded for you in the centralised national register of inhabitants?
I mean, I recently needed a notarised copy of my rental contract just to register my change of address with the government, which is mandatory here every time you move. This is not a system that deals well with “yeah, I don’t have any papers for that”.
Sounds like someone in HR is going to get fired soon!
You almost certainly do in fact have an employment contract.
[1] https://www.ft.com/content/c22e5235-6947-4781-8fce-d510914cb...
... also about Thain's 1.2-million USD renovation of his office during the Crisis
frequently in acquisitions/mergers/spinoffs, all the bad news is delivered before the deal so the new management can start fresh, and blame anything before on their predecessors.