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Global Union message to World Economic Forum:

End 'business as usual' practices that spend billions in bailout money on banking bonuses



UNI Global Union today said the hefty performance bonuses being paid to employees at banks receiving government bailouts shows that while the financial crisis has changed ownership structures across the financial industry it is still business-as-usual when it comes to overstuffed paycheques. This is the message UNI General Secretary Philip Jennings will take to the World Economic Forum in Davos, Switzerland, this week.



“We would not give a bonus to a factory worker who destroys the production line or a programmer who introduces a bug into software, yet all these bankers are being rewarded for watching while the industry ran headlong into a meltdown,” said Jennings. “They did nothing to stop it and in many cases they continued to engage in risky business even as they saw what was happening in the rest of the industry.”



Ousted Merrill Lynch CEO John Thain decided to pay $4 billion in bonuses in December before the company’s buyout by Bank of America was complete. Merrill, which got $10 billion in bailout government from the US government, lost $15 billion in the fourth quarter of 2008. Even though Bank of America did not officially take control of Merrill until January 1, they were informed of the bonus plan and apparently did nothing to stop it. Bank of America almost backed out of the deal but agreed to follow through with their deal after the U.S. government agreed to provide $20 billion in capital and $118 billion in asset guarantees.



The bonuses, which can make up the bulk of investment banking salaries, are supposed to be tied to performance but that benchmark seems to have fallen by the wayside in the midst of the crisis. And bankers are getting their cheques regardless of their performance last year.



Swiss bank UBS Warburg, which was bailed out by the Swiss government in the fall, is also to planning to pay CHF 2 billion or more than $1.7 billion despite posting a staggering CHF 8 billion fourth-quarter loss. The new payments were approved by Finma, the new Swiss financial regulator. While UBS’s CEO and Chairman have forgone their 2008 bonuses, other top executives will share in the payout.



Jennings said it is shocking that the bloated pay packages for bankers, which were once explained away by huge banking profits, still remain even after financial markets have collapsed.



“Regulators seem to be giving bankers carte blanche to reward themselves for poor judgement and malpractice,” Jennings said. “If regulators do not rein in this type of spending, taxpayers, workers and investors will be footing the bill for their largesse for years to come. Their needs to be a system-wide overhaul of regulation and payment structures.”



UNI believes that all banks being bailed out with public money should have public oversight and that governments must take an active role in their management. This includes overhauling pay structures; making sure that employees are consulted and their rights are respected during restructuring; ensuring financial products are in the interest of the long-term health of company and the interests of the customer; and that bailouts do not lead to oligopolies and the diversity of the industry is safeguarded.



UNI is the global union for skills and services with 20 million members in 900 unions.



For more information or to set up an interview with Philip Jennings at the World Economic Forum, contact UNI at +41 79 888 0753 or rachel.cohen@uniglobalunion.org.