What do YOU think?

So if it was up to you, do you think bankers deserve their bonuses?

Many people believe that bankers would have no alternative should they not be paid as highly or receive their bonuses. This however is not true, the best talent have other options. For example, Citigroup trader Matthew Carpenter  left the investment bank to work for a hedge fund. If banks were to face greater restrictions/reductions on their pay, over time we would see the departure of top talent; weakening the largest financial institutions and as a result weakening the financial system as a whole.

In an article I read, they used professional sports as an analogy for this situation:

Say a football team has a terrible year because their star goalie had a bad season. However the star striker led the league in scoring? Does this mean the club should not pay the striker generously to ensure that he stays with the team? And, if the team were to have an excellent season the following year, does that mean that players should not be paid due to the bad record from the previous year? Of course not. Such practices would be detrimental to the team.

I believe that the traditional bonus system is no longer promoting nor sustaining the banks’ financial performance in the long run. Bonuses based on annual performance create a short term incentive focus. However the elimination or capping of these bonuses is not a solution to the problem either and will simply damage the financial system further without doing anything to prevent future crises. More work needs to be done on creating a more effective incentive reward system; one where the individuals who are part of the failed system face huge losses themselves if their gamble does not pay off. This should promote the long term financial stability of the banking sector. This article sums up my opinion. 

The bank bonus issue is very controversial and it is one that is not going to be resolved easily. I believe that we will be hearing about bankers and their bonuses for quite some time to come.