Letters: Bonuses defended...
1 Feb 10
In response to November’s letter of the month, bankers’ bonuses are much misunderstood
It goes without saying that these should take into account a longer-term view. When a banker structures a five-year deal, they shouldn’t be rewarded on year-one profits only for the bank to suffer losses in subsequent years. It is difficult, if not impossible, to defend the past performance of banks in this respect. However, if used correctly, bonuses can be a very effective tool in managing profitability.
Like many other businesses – e.g. accountancy firms – banks are people-intensive businesses with high fixed costs and highly variable revenues. Bonuses are not just a reward for “exceptional performance”, they are a mechanism to align costs with revenues – something every business should strive to do. How many businesses could cut a large proportion of their wage bill without letting employees go and jeopardising a recovery when it comes? This typically works best at the upper end of the pay scale as it’s much easier for higher-paid employees to have a proportion of their wages uncommitted.
Unfortunately, such people tend to be an easier target for the public outrage that has rightly followed the banking crisis. As accountants, let’s not be blinded to the benefits of a very useful tool.
CA, name and address withheld
Letter an unqualified hit!
I think that David Young’s letter [Letters, December 2009] in reply to my September rant about the EU gravy train quite effectively proves my point.
He says that “the number of CCAB or professionally qualified accountants working in the European institutions is miniscule”. Quite! This clearly implies that the Brussels accounting operation is manned by a huge team of ill-qualified people with little or no professional accountancy qualifications. It is surely not possible to operate budgets and accounts as large as those of the EU with a miniscule number of professionally qualified accountants?
I was by no means implying that ICAS members would discard their integrity once they work for the EU. Indeed, I was trying to make the point that if there were a lot more ICAS members and their equivalents working there, fully backed by their respective institutes, much of the sleaze, graft and fraudulent accounting would be eliminated. I was also making the point that, as illustrated by the Marta Andreasen case, incredible pressure is brought to bear on accountants to meekly accept the word of department heads.
I wonder if David Young has actually read Brussels Laid Bare [Marta Andreasen’s book, written after her departure from the European Commission] and if he would care to comment on the veracity or otherwise of Ms Andreasen’s allegations?
I would be interested to hear if Mr Young, during his 20 years as Accounting Officer of the European Parliament, was aware of the fraud and accounting discrepancies which Ms Andreasen alleges took place.
I should have thought that a discrepancy of €200m between the closing balance in 2000 and the opening balance in 2001 would have been a major discussion point among the accountants working there. Or is Ms Andreasen’s allegation pure fabrication?
John Russell CA
Ellon, Aberdeenshire
Loose laws led to bailouts
The country’s independent financial regulator now calculates the cost to the UK public of the bailouts. Every citizen might “only” have to pay £14,000, which is down from earlier estimates. The National Audit Office (NAO) suggests the world record bailout in Britain was necessary in the public interest, to keep the national economy going.
Unfortunately, the rescue was the price of years of a deliberate policy of loose regulation of UK finances, and the harm couldn’t be undone. Is the NAO being investigated? And has the costly policy at least been ended? Possibly not, looking at the UK’s disagreements on finance with the rest of the European Union.
Ian Jenkins CA, via the CA Mag Online website