Employees call the shots in the City

Bonuses, bonuses, bonuses. Morgan Grenfell Asset Management pay theirs in late February and few people yet know what they are going to get. Those who think they will be little or nothing point to the pounds 400m cost and rising of the Peter Young debacle - a couple of years' profit for the Deutsche Morgan Grenfell investment banking operation as a whole. But there's another school which says that if MGAM doesn't match the bonus bonanza being experienced elsewhere in the City, then its best people are going to walk and there won't be much of a business left.

It seems unlikely that Nicola Horlick directly played that card in the events that led up to her "suspension" as MGAM's pensions supremo, but the episode has highlighted the problem in no uncertain terms. The City has become a place where employees call the shots, not shareholders or organisations. There could be no more absurd a scenario than the one being acted out at MGAM. Here is an organisation which has failed in spectacular fashion, yet if it punishes its employees, as it should, making them take collegiate responsibility for and share in the costs of their failure, it might end up without a business at all.

Perversely, then, Deutsche may have to pay the wretched employees of MGAM an even higher bonus, to compensate, as it were, for the stress and shock of a catastrophe which was collectively of their own making. It is hard to imagine a more Alice in Wonderland world. That, however, is the reality of the City these days.

There's almost a parallel to be drawn here with the curse of union power. "What? The company's lost a packet? Not my responsibility, guv. If you don't up the wages we'll all be out." In the virtual economy inhabited by investment bankers, the going rate for a job is constantly bid up, regardless of underlying profitability or real market worth.

But back to MGAM. First impressions are often misguided and it is possible that the likely impact on MGAM of Mrs Horlick's impending departure was exaggerated in Business Comment yesterday. A day on, and Morgan Grenfell was claiming the whole thing had been blown out of all proportion. Indeed, there was some sense of relief and even satisfaction at such a high flyer finally getting her comeuppance. There's almost certainly an element of male, old-school tie backlash in these sentiments.

All the same, MGAM is right to point to Mrs Horlick's apparent failure to do serious damage to the organisation. She tried to recruit a team to take with her, allegedly, and they all said no. Perhaps loyalty still counts for something after all. But we are going to have to wait until the bonus is declared and paid to judge the strength of that, aren't we?