Poachers May Ensure the Survival of Bank Bonuses

Standard Chartered, the UK-listed Asian-focused banking group unveiled a full-year profit of more than $5 billion and said it will pay bonuses totaling $1.1 billion.

Standard Chartered CEO Peter Sands gave his own bonus of $3.2 million to charity, but defended his decision to pay big bonuses to his staff by pointing to a “red hot” fight for talent.

The big paydays for the top traders and investment bankers, just months after governments across the world had to throw trillions to shore up the entire system, clearly rankles the average tax payer. Unfortunately, the reality on the ground for Sands and his peers means they have to remain as competitive as possible while at the same time walking a fine line with angry lawmakers and voters across the world.

If Standard Chartered does not reward its key people they will be poached by rivals from Europe and the US eager to expand into the banks key markets across Asia. Short of a blanket ban on poaching staff across the world for the entire industry, this threat to individual firms remains huge.

Paul Hinds, head of temp and contracts at City headhunter Kennedy Pierce, says the market for City staff has clearly warmed up since the fourth quarter and says the power is shifting back towards staff with “very attractive skills.”

The biggest area of growth Hinds said he is seeing is in compliance and risk management ,but clients are in many cases telling him they will pay more to get their people.

Not everyone agrees, though.

“High competition is always the cry as far as the city is concerned,” said Linda Jackson, managing director of recruitment group Fairplace. “Those bankers who make so much are few and far between and are easily poachable from their companies, as they psychologically aren’t focused on staying where they are.”

Whoever you believe, the CEOs of the major banks find themselves between a rock and hard place. Pay big bonuses and you retain staff at the expense of relations with the regulators and politicians. Don’t pay big and your best rivals will poach your best people and eat your lunch.