There are millions of reasons for fat bonuses

EXPERT VIEW

At one of those endless City Christmas dinners, I turned to the currency speculator on my right and asked him where he lived.

"Mayfair and Manhattan - I spend two weeks every month in each," he boasted.

"Don't you get fed up with all the commuting?" I asked. "Six/seven hours each way?"

I was pinched sharply by a friend on my left, who whispered in my ear: "Three hours, stupid. His Christmas bonus this year was worth millions."

I was playing with the Big Boys.

Christmas is a time for giving, and no more so than in the City. Christmas bonuses are reaching life-changing proportions, all part of the Americanisation of business I have written about previously in this column. Wall Street banks brought over their system of "compensation" some years ago, and the London houses have been forced to compete. For many, this can mean relatively restrained salaries and Brobdingnagian bonuses.

Not surprisingly, this is all attracting a lot of press comment. Goldman Sachs has been widely publicised as having pounds 100m to give away to its 2,500 "senior staff". However, I can report worrying rumours that this story is rather understated.

As one of the Goldman boys said to me recently, "Jeez, Chris, do the math: pounds 100m divided by 2,500 is pounds 40k each. That's what we'll be giving the janitor."

Does all of this excess have a purpose? Is it in the client's interest? It may stick in the throats of those of us who don't get the million-dollar cheques but I fear the answer is yes. Like it or not, this is overwhelmingly a people business. The owners of Wall Street are not running charities. They realised long ago that someone in charge of billions can make a difference of millions. If you make a few hundred million out of someone being just that little bit better than the guy round the block, why not throw them a percentage to keep performing?

These professionals use increasingly specialised, and demanding, skills. Some dealing desks have fast-talking traders who speak four or five languages, operate more technology than Cape Canaveral, and still don't get to have breakfast with their partners.

When it comes to the tribe of analysts, the rocket scientists of the City, you can multiply this. These stars also compete directly with each other and with the best the opposition can muster. It's a bit like athletes. Anyone running the 100m race would knock the spots off the man in the street, but put them head to head with another athlete and the real class emerges.

Bonuses are in the client's interest. In this competitive business it is vital for the clients that you hang on to your talent. It's a global financial community out there, and we all have to compete globally. That means keeping up with the Americans and stopping them from poaching your stars. Many sensible firms will pay key staff two bonuses: one in cash now and one deferred for three or even five years, dependent on employees remaining with the company. Not many people would give up five years' worth of these bonuses easily.

This is not to deny that all of this can lead to a slight flavour of the last days of the Roman Empire. One trading friend went out last year and bought a vintage car for cash. His wife was not amused - it cost more than their house. Worse, the security garaging meant they would have to move house to accommodate it. She smiled wanly: "The boys must have their toys - it makes up for all those 5am mornings." She might also have said that the other side of the high salaries is the insecurity that goes with them. On Wall Street this is why those bonuses are quickly turned into investments. Some people will never see 40 at their desks.

As ever, American imports can prove to be double-edged swords. But there is one aspect of the Wall Street system that, I believe, we should emulate.

Giving is the other side to the big bonus coin and in New York it has reached massive proportions. Go to almost any party at this time of year and you'll find your hostess passing round the velvet bag for cheques. We could do with a bit more of this in London.

Let's hope that charities will get a good slice of the action around the Millennium, and that we'll see a little of that trickle-down economics. Come on, it's Christmas.

Christopherwalker@hsam.co.uk

Sport
Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Voices
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
Sport
world cup 2014
Sport
Ray Whelan was arrested earlier this week
PROMOTED VIDEO
Arts and Entertainment
In a minor key: Keira Knightley in the lightweight 'Begin Again'
film
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
books
News
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
News
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Life and Style
It beggars belief: the homeless and hungry are weary, tortured, ghosts of people – with bodies contorted by imperceptible pain
lifeRough sleepers exist in every city. Hear the stories of those whose luck has run out
News
Mick Jagger performing at Glastonbury
people
Life and Style
fashionJ Crew introduces triple zero size to meet the Asia market demand
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Santi Cazorla, Mikel Arteta and Mathieu Flamini of Arsenal launch the new Puma Arsenal kits at the Puma Store on Carnaby Street
sportMassive deal worth £150m over the next five years
Arts and Entertainment
Welsh opera singer Katherine Jenkins
musicHolyrood MPs 'staggered' at lack of Scottish artists performing
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Arts and Entertainment
Currently there is nothing to prevent all-male or all-female couples from competing against mixed sex partners at any of the country’s ballroom dancing events
Potential ban on same-sex partners in ballroom dancing competitions amounts to 'illegal discrimination'
News
business
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Business Analyst Consultant (Financial Services)

£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

£60000 per annum: Harrington Starr: A leading provider in investment managemen...

AVS, JVS Openlink Endur Developer

£600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

Technical Support Analyst (C++, Windows, Linux, Perl, Graduate)

£30000 per annum: Harrington Starr: A global leader in trading platforms and e...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice