FTSE 100
Dow Jones

Tuesday, 5 March 2013

Bonuses and maluses

I earn a bonus as a reward for my successful endeavours.
You earn a bonus because the institution needs to retain your services in a competitive market.
He/she/it's bonus is an unjustified outrage.

It seems that the CEO of Rolls-Royce is quite entitled to earn bonuses and other rewards six times the value of his base salary (total pay for 2012 as near as dammit £5 million against a base salary of £800k plus change since you ask), but that for bankers to earn a bonus of more than 100% of base pay is a mortal sin.

At least in the view of MEP's and the EU Commission.  Well, they are quite entitled to their view, but that doesn't necessarily have any relevance because they may not have the power to do anything about it, but more on that in a minute.  The immediate reaction is that the MEP's and EU Commissioners all live the life of Riley in Brussels on expatriate packages paying for second homes, living away from home allowances and in the case of those working at the EU, an infeasibly low tax rate on their salaries - all of which is of course completely risk free, not subject to performance appraisal or even financial results - not that there is any financial risk in their taxpayer funded business.

But let's go back to their powers.  The EU is only entitled to make rules in areas granted to it by treaties, and the relevant treaty and Articles would appear to be Articles 151-153 of the Lisbon treaty, particularly Article 153.  To give it some context, here is Article 151.

Article 151
The Union and the Member States, having in mind fundamental social rights such as those set out in the European Social Charter signed at Turin on 21 October 1961 and in the 1989 Community Charter of the Fundamental Social Rights of Workers, shall have as their objectives the promotion of employment, improved living and working conditions, so as to make possible their harmonisation while the improvement is being maintained, proper social protection, dialogue between management and labour, the development of human resources with a view to lasting high employment and the combating of exclusion.

To this end the Union and the Member States shall implement measures which take account of the diverse forms of national practices, in particular in the field of contractual relations, and the need to maintain the competitiveness of the Union economy.

They believe that such a development will ensue not only from the functioning of the internal market, which will favour the harmonisation of social systems, but also from the procedures provided for in the Treaties and from the approximation of provisions laid down by law, regulation or administrative action.

Now I think it is pretty unclear whether the regulation of banking pay falls under that heading, but let us give the Eurocrats the benefit of the doubt.  So then we have Articles 152 and 153 which you can read in the attached links which contains a lot of guff about the protection of workers rights and harmonisation, followed by the following in Article 153 (5).

5. The provisions of this Article shall not apply to pay, the right of association, the right to strike or the right to impose lock-outs.

Did you see that Mr Barosso? "Shall not apply to pay".  And that includes bonuses. Of course some Euro twit came up with the line that this wasn't about pay but about how much was paid as salary and how much was paid as bonus.

Wrong, thicko.  Pay is pay and I don't care how much Euro-spin you want to ladel out, the treaty couldn't be much clearer.  All pay controls are strictly off limits to the EU.  Try pulling a variation on 153 (5) and claim that the EU may not be able to legislate on the right to strike, but is not prevented on legislating on the length of strikes.  See you in court, loser.

Anyway, there may be another article under which the EU claim these powers, but so far, they haven't been able to point it out.

No comments: