With the current financial crisis pushing more people toward the breadline, talk of executives earning bonuses and contractual amounts that seem out of kilter with their job continues to create discontentment in the workplace.

Rightly so: Whether an executive is leading a profit making business or one that is making redundancies, the pay currently on offer would be out of place in times of a boom and can in no way be justified in the current economic climate. Unfortunately, all too many banks have avoided taking responsibility and shareholders have sat by idly, while conditions for the average account holders have continually decreased.

This suggests that the time is ripe for a change – and you can significantly contribute to it.

Financial crisis

Some analysts suggest that banking bonus packages that rewarded quick profits and allowed people to borrow beyond their means are to blame for the banking crisis that led to the credit crunch. Compensation packages for bankers that were not in the long-term interest of the bank have often been cited as a cause for the credit crunch, so when the double-dip recession began, the Bank of England ordered banks to slash bonus payments in an effort to stem the losses.

Government support

The public would have every right to expect government supported banks like the Royal Bank of Scotland to be conservative with the wages and bonuses they pay, but that is not the case. A recent £963,000 bonus payment to RBS chief Stephen Hester was not well received in the press and has been challenged in parliament. Labour leader Ed Miliband described the pay-out as ‘a disgraceful failure of leadership by the Prime Minister.’

Payoffs

The fury over senior management pay is often illustrated best when an executive is sacked and receives a massive pay-out. But pay-outs like the £450,000 paid to George Entwistle, the former director general of the BBC, can be lower than the contractual fees payable in the event of dismissal and are far lower than the costs attached to constructive dismissal and unfair dismissal claims that could arise as a result of the sacking.

Board structures

Most board structures include a remuneration committee who assign the level of compensation and the exact pay package executives are offered. These can include stock options, bonuses and other privileges alongside the base salary. These committees determine the executive’s payment package without having to justify their decisions to shareholders.

Barclay’s AGM

There seems to be universal consent that the solution to the problem lies in the hands of shareholders and that they should therefore be awarded more power in the banks’ internal decision making process. The recent situation at Barclay’s AGM , however, illustrates a problem with shareholders voting on the subject of executive wages. The remunerations on offer at the AGM were by most standards excessive and represented very little value for money for shareholders, yet only a quarter of the shareholders voted against them. Given that the bank’s bonus pool is three times the amount awarded to shareholders in dividends this is a strange course of events. Analysts are unsure as to why there was little resistance to these amounts, but again market forces dictate that to get the right people you have to pay the market rate, so perhaps the shareholders were simply protecting their investment by agreeing salaries that attract and retain employees who can generate profits.

The problem with shareholders

In an article for The Guardian, Catherine Howarth turns her attention to the shareholder dilemma: “Despite all the talk of a historic shareholder rebellion at Barclays, just 27% of shareholders voted against the remuneration report. The fact remains that a clear majority of shareholders voted in favour of it, which begs the increasingly urgent question, what is wrong with the shareholders? The heart of the problem is a lack of accountability by large institutional investors – our pension funds and the big asset management firms who control shares on behalf of savers in the UK.” This created the challenge of exerting pressure on these funds and asset management firms in a bid of making them see their part in the bigger picture.

Combating overpayment

Many banks have defended high executive payments. To get the right person for the job, their argument goes, you have to pay a competitive salary and when you are considering a CEO position, a high salary may be needed to bring the right candidate from his existing job. But although these high salaries are market led, they can be combated. Creating a sympathetic and productive working environment can turn out to be more attractive to a potential candidate than perks and a high salary, for one. And secondly, there has never been any conclusive evidence that CEOs truly perform better if their salary hits astronomical levels. What is required is a thorough re-thinking of recruitment strategies at all levels. Unfortunately, not many banks truly seem to be open for this.

What you can do

It seems unlikely that the banking world will change anytime soon. Executives have gotten used to excessive salaries and shareholders seem content to approve these expectations. Waiting for the government to lend a helping hand also seems futile to say the least. Which leaves you with a last option: Leaving the traditional banking system behind you and opting for alternative solutions instead. Over the past few years, new, basic bank account have become available from new financial institutions. By switching to one of these accounts, which offer you all but the full range of essential banking services, you can not just voice your discontent, but actively encourage a change in corporate culture. The crisis may be hard on many – but perhaps it may end up doing some good after all.

Attached Images:

• License: Royalty Free or iStock source: http://photodune.net/licenses/photo

By William Masters

This article was written in association with guaranteed bank account provider eccount money.

William Masters works as a finance journalist in London. He specialises in personal finance on a national and international level, contributing regularly to a wide range of online magazines and blogs.

For more career tips, check out these posts:

Social Media and Employment	How to Find Your Next Job Using Social Media	Stop Auditioning for Jobs!	Simple Steps to Easy Referrals

Join Us On Twitter:

Like Us On Facebook:

Visit Our Bookstore for Great Values and Instant Download!

101 Tips Every Seeker Should Know	Ultimate Online Job Seekers	Learn The 10 Biggest Interview Mistakes	Avoid These 10 Resume Mistakes

Check out these hot articles!

This makes us laugh… every time we see it	The First Step to a Job You Love	Beef up your email signature

Learning Leads to Earnings, Especially for Men	How to Ace the Job Interview BEFORE it Starts	Video Resumes May Work Wonders; But Not for Everybody

This entry was posted on Tuesday, March 26th, 2013 at 8:41 am and is filed under Career, Job Search, Salary Negotiation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.