Bonuses: just wait, it's going to get worse

Here is a prediction I think you won't be seeing anywhere else, for a while anyway.

The Fred Goodwin debacle at RBS has shown that anyone who gets themselves in a position to manipulate their bonus and pension payouts can do virtually what they like. Just wait, it will probably get worse and here is why:

• Share prices and so on are probably at or around rock bottom and many managers mistakenly relate their performance as a manager to their company's share price. This has been the case for a long time even though everyone appreciates it is far from a rational thing to do.
• Bonuses and possibly pension and even general remuneration packages are probably being set in terms of share prices now.
• Put the two together and you will see in the next two to five years or so that many managers and management teams will be "earning" massive bonuses and pension enhancements as a result of what will probably be major increases in share prices over those periods.

What is wrong with this and why am I warning you that it is going to happen? The share prices are going to rise ANYWAY, irrespective of the abilities and actions of the managers, above and beyond the minimum they can do to keep the business working.

Even if a manager is deemed to have failed due to lacklustre profits and weakening balance sheets, if the stock markets marks the shares higher in the future than now, these clowns will be paid their bonuses and pension enhancements.

This is how the Fred Goodwins on this world get away with blue murder. It's so easy.

Duncan