Bonfus culture replaces bonus culture

Finally, it seems, the Western banking sector has responded to the “earth-calling” sounds. At least where remuneration is concerned. With the exception of Goldman Sachs (and even for it, its exec didn’t get a penny), every other big banks has either cut bonuses or in some cases removed bonus altogether. Many are talking about headcount freeze for 2009 and more worryingly, pay rise freezes. Those feeling particularly un-philanthropic are talking about having a uniform pay review across their various business units… The bonus in the UK and I guess in the US has become bigger than the salary in the banking sector. In the financial sector, the bonus cash element has tended to be 100% of the salary for top performers in the front-office and no less than 5% for average performers in the back office. Many made lifestyle decisions around the bonus payment for example you’d hear somebody has taken 1 yr off to travel when they get their bonus, bought a new house, jacuzzi, ferrari etc. Others changed jobs around the bonus. Some had guaranteed bonuses.
So it’s a big deal.
In most places, the no bonus announcements were made the day or week before employees were to find out their pot. Lakini this time, it’s a bit of a perfect storm because there is no golden hallos to move to.
But at least it’s better than the consulting industry where one of the big 4 has actually offered its staff a stark choice between redundancy or 4 day working week and 10-25% pay cut.

So is this the end of the Bonus? Its current form where the cash element is like 75% of the bonus, just isn't socially/politically tenable and won't be for several years. In its place, my suggestion would be to have share options that are cashable proportionatily over a period of say 5 years. Thus aligning firm's medium term goals with employee's need for perfomance recognition and reward.

PS: The bonfus culture is so-called. Because there is no "F" in bonus. You have to say it quickly.

PPS: As mentioned by somebody previously, the effect of this credit crunch is being felt intensely by minorities. We really must shape up our economies.