It's hard to comprehend but Mr. Thain, CEO of Merrill's, who were saved at zero hour from going bust like Lehmans, has actually lobbied his Board for a $10m bonus saying if it wasn't for him the company would have gone bust.
I had to read it several times to work out whether this was a joke but sadly it is the Financial mentality - no doubt if he doesn't get it he will ask for $5m because he kept the office windows clean during the crisis. The fact that because of his mismanagement the entire company was at risk seems to have alluded him.
It's that bonus culture (some would say hallucination) which many believe got the banking sector into the terrible mess we see and it's heartwarming to know the little lambs are suffering and in need of bonuses despite the end of the bonanza.
Hey, Leave Off The Bankers
Let's face it, our friendly but greedy banking executives were not the only ones guzzling the rich honey of short term success. And I know you will reach for your hankies on this tear-jerking story.
Knight Frank, commercial property estate agents (no please, read on) have suffered a 40% decline in sales since their new year started in April. Further the Royal Institute of Chartered Surveyors (RICS) have forecasted that commercial property prices could halve in price by the end of next year, making this crash worse than the one experienced in the 1970s.
The staff and partners at Knight Frank shared out a measly £81m from the bonus pool last year while in April they only had £46.4m to share out and that to go around 28% more staff than the previous year, don't you know. The 46 partners, bless them, had average bonuses of £780,000. They are cautiously optimistic for next year they say.
Er, hello! The bonanza is over chaps, sales down 40% and rapidly falling prices after increasing staff by 28%. Get out those pencils and do the sums. The bonus pot will only be good to stop the leaky roof this year, I'm afraid.
The Scale of Things
Like the housing market, commercial property is set to slump alarmingly and forecasts recovery in 2011 according to RICS. Capital values have already slumped 25% since August 2007 and they predict drops of a further 16% this year and 10% next year. The belief is we are only half way in what they describe as a 'Price Correction' which always meant to me someone correcting a wrong digit, not slashing by two.
More worryingly, the CBI has reported that there is a marked slowdown in the Service Sector which accounts for 75% of UK economic growth and is suffering its worst drop in activity since records began a decade ago. The CBI calmly urged employees to prepare for a rush of redundancies - no 'Don't panic!' cry there then. To add to all this woe, the CBI further said profitability for consumer and business services were falling at unprecedented rates as appetite for spending dries up. To put a final nail in it, they said job losses in the Service Sector had been minimal so far but would falls would get faster in the coming months. Thanks.
Just a Slight Reminder
I know I have harped on about this but I get it every day - 'My business is recession proof' or 'I have not felt any effect yet' and so on. What the CBI is saying is that we haven't even started feeling it yet. The Service Sector is bloated with excess profit from the good years and it is very ripe for popping. For all those servicing major or minor businesses, it is a time to start to review that pipeline and check whether you are being realistic, then doing something about it. Things are changing very rapidly from day to day and those who do not plan to do something about the recession will be the victims and spectacularly so.
If you don't know what this means, just read my blogs or call me and I would be happy to explain.
No comments:
Post a Comment