It seems appropriate that the former chancellor Kwasi Kwarteng’s idea to end the cap on bankers’ bonuses will be implemented on October 31 next week, since the yearly ritual that bankers undergo on “B-day” (as we liked to call it) and Halloween’s traditions are remarkably similar: one involves nervously approaching a potentially belligerent neighbour’s door in the hope you will get something tasty to boast about, while the other is called trick or treating.
I worked as an equity analyst in the City for 12 years and am familiar with the impact that unfettered bonuses can have on an already gruesome work environment. When you can suddenly pocket seven or more times your already bloated annual salary, rather than just “double bubble” as is permitted at the moment, it brings out the very worst in a workforce that is already aggressive, macho and hyper-competitive.
For very good reason since 2014, under rules inherited from the European Union, banks and investment firms have had to limit bonuses for employees to twice their base salary to deter the kind of risky behaviour that caused the 2008 financial crisis. Now it will be back to the bad old days.
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“B-day” generally took place in November, yet it created a year-long atmosphere of competitiveness and backstabbing that would grow to a crescendo in that all-important week when every front-office employee was called up one by one to the boss’s corner office to receive a formal letter explaining exactly how much extra cash they would receive that year. Colleagues would find an excuse to walk by the glass-fronted office during your “bonus negotiation” and all eyes on the trading floor would be fixed on yours as you tried your best to stroll nonchalantly back to your desk. Occasionally, a particularly disgruntled co-worker would snatch his jacket from the back of his chair and storm out of the office, but most of us would play by the unspoken rules and give nothing away.
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Effectively your bonus is a judgment of your brilliance, compared with that of your colleagues. In every bank the bonus pool available for each department is finite and we all knew we were playing a zero-sum game — with gains to my bonus occurring at the expense of some other pinstriped chump’s handout. The situation was made worse because the precise source of a bank’s revenue is often nebulous, and traders, salesmen and analysts would lay claim to the same lump of commission.
To maximise my early Christmas present, my sole aim during office hours, and often after hours as well, was to convince the men in grey suits that my colleagues were incompetent buffoons while I was a revenue-generating genius. To achieve this I pretended that my boss’s inane prattle at Corney & Barrow was fascinating, used my vast expense account to butter up anyone who might influence my final number, shamelessly blew my own trumpet during in-house presentations and stole my colleagues’ thunder whenever possible.
Any big client whose opinion might be canvassed by my superiors would suddenly find themselves inundated with invitations to Champions League football games, Madonna concerts and £2,000 lunches at Pétrus — from me and my equally avaricious colleagues/competitors. I fabricated loud calls with headhunters in autumn and organised interviews with second-tier banks I had no intention of joining, all with a view to making me seem sought-after and deserving of a telephone number bonus.
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In fact, and I’m not proud to say this, I was the heavyweight champion of “bonus maximisation”. A combination of greed, “fast and loose” ethics and the knowledge that I wouldn’t be able to stick a career in the City for long ensured that boosting my bonus “by any means necessary” took precedence over my actual career. Therefore, giving the impression that I was doing a great job was of far greater importance than actually doing a great job. In my defence, I had little choice because I knew that everyone else was doing the same thing.
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The problem with the bonus system is that it amplifies an already unpleasant trait that bankers by nature tend to exhibit. For people obsessed with the market, the size of your bonus is considered to be the market’s accurate assessment on how worthwhile a human being you are and, as bankers know all too well, the market is never wrong.
Of course, the worst outcome of Kwarteng’s legacy policy is that bankers will be incentivised to return to the gambling frenzy that preceded the 2008 financial crisis and, in so doing, further destabilise an already fragile financial system. But spare a thought also for the bankers, who will find themselves once again in a nightmarish work environment as they are pitted against their colleagues for the vast rewards that only ruthless office politics and devious scheming can yield.
@cityboylondon
