Daily Lesson from Life 26 January 2009

"UBS still pays out bonuses

It is going ahead with staff bonus payments. -Mon, Jan 26, 2009 AFP

ZURICH, SWITZERLAND - THE biggest Swiss bank, UBS, which recently received a $60 billion (S$89.9 billion) state rescue package, is going ahead with staff bonus payments, an official financial watchdog said on Monday.

A spokesman for the Swiss financial markets surveillance authority (Finma) said that it had to ensure major cuts in the bank's bonus payments for 2008 before it allowed them to go through.

He said Finma 'gave its agreement last week' to the bonuses paid to the whole of the bank's staff. 'We had intensive discussions and carried out a massive and substantial reduction,' in the bonuses, the spokesman added.

Some Swiss media reported on Sunday that the payments totalled two billion Swiss francs instead of the intially planned three billion.

The Finma spokesman declined to give the exact amount, saying that it would be revealed by the bank when its annual results were released on February 10.

UBS was one of the banks hit the hardest by the United States subprime home-loan crisis and is widely expected to report the biggest loss in Swiss corporate history, about 20 billion Swiss francs, for 2008, the newspaper Sonntagszeitung reported recently.

UBS was forced to seek a $60 billion state aid package last year and lost dozens of billions of francs in deposits as unsettled customers withdrew accounts from the troubled bank."

AND

"BofA played role in $4 billion Merrill bonuses: report

Bank of America told the FT there were conversations about the bonus payments prior to the pay-outs. -->
Mon, Jan 26, 2009 Reuters

PHILADELPHIA, USA - Bank of America played a role in Merrill Lynch's controversial decision to pay $4 billion in bonuses in December, the Financial Times reported on Sunday.

Bank of America had said the payment of $4 billion in compensation in a fourth quarter in which Merrill suffered $15 billion in losses was sanctioned by John Thain, Merrill's chief executive.

The FT reported that Thain, who left the firm last week, had at least two conversations with Banc of America's chief administrative officer, J. Steele Alphin, before a December 8 board meeting at which Merrill's bonus payments were approved.

Bank of America told the FT there were conversations about the bonus payments prior to the pay-outs.
"We never said we didn't talk with them about it. But, in the end, it was their decision and they informed us of it," the company said. Bank of America could not be immediately reached for comment."

WHAT a DEAL!! I must be very very happy if I were one of the UBS or Merrill Lynch staffs who enjoyed some of the billion dollar bonuses for running up RECORD LOSSES for my employers!!

Lessons for me are:

1. if you are not CAREFUL and FIRM, you will be taken to the cleaner! There are people who have NO SHAME and will not think twice about taking money when the money was given initially to 'save life - the life of the companies'!!;

2. there are LEADERS who are ever ready to PASS the BUCK! In UBS case, the logic was: It is 1billion less than asked for! In Merrill Lynch case, the reason (or excuse) offered is: BofA did not decide on the bonus it was the Merrill Lynch board!! (Even when BofA is going to absorb Merrill Lynch!!);

3. as Leaders you simply just have to be very firm and clear about WHAT is reasonable and What is NOT!! There is simply NO reason to give out bonuses for 2008 when 2008 performance is a totally DISMAY one!! It points to fatal flaws in the structuring of the reward system. Someone has dropped the ball or being SO USED to using a certain formula that they will reward PART of the bank's that BRING in the REVENUE (BUT not the profit!) disproportionately! As leaders, we must ensure there is a sense of SHAME for taking money that ordinary and reasonable human being feels incongruous and incomprehensible even if the LEGALITY is not at risk!!

I just simply failed to understand how can anyone get paid a bonus when he or she created a huge loss for the company!! If it is made criminal to rob people of it's money, I do not see why these bonuses that are to be given out should not be classified as 'daylight robberies'! I rest my case. For now!!