Finance Corner By Chris Dickin MSc
About the author Chris Dickin MSc Chris Dickin is an independent cost reduction consultant and financial trainer, working for major companies throughout Europe, Africa, the Middle and Far East. He first trained as a Management Accountant with the Rolls-Royce Limited aerospace division in the UK. During that time, he qualified academically as a professional Accountant and he gained a Master’s degree in Financial Control. Over the next fifteen-year period, he gained a wide experience of UK Industry and Commerce, holding positions as an Accountant through to Financial Director in the finance function of several major UK companies. In 1970 Chris joined the University of Derby as a Finance lecturer. A 23 year academic career saw him progress to become the Assistant Dean responsible for resources in the Derbyshire Business School overseeing Degree and Professional courses.
Banks are well known for giving out the umbrellas when it is sunny and collecting them in again if it starts to rain, - so recent headlines in London newspapers are not surprising: LONDON DAILY MAIL HEADLINE (Referring to the Royal Bank of Scotland): “Rewards for failure at RBS: State-owned bank posts losses of £2billion - but 'casino bankers' still enjoy £390million bonus pot” LONDON DAILY TELEGRAPH HEADLINE:
“RBS boss calls £1bn bonuses 'good value'”
“RBS boss calls £1bn bonuses 'good value' RBS chief executive Stephen Hester defends the state-backed bank's policy to pay nearly £1bn in bonuses to senior executives despite the bank’s £2bn loss.” At first thought, it seems impossible, - even reckless and indecent, to pay huge bonuses to senior executives when the company returns a £2billion loss. How can you do that? How can the CEO say it is justified? Surely, it’s not reasonable? But actually, it’s quite simple. Let’s imagine you are employed by an IOC that operates in West Africa, the North Sea and the Far East. You were appointed four years ago to head up the West African operation on a contract giving you a basic salary and profit related bonus. Under your leadership, with your energy, drive and management skills, the West African division of the company has a profitable, successful year and your contractual bonus is well earned.
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