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Dutch rise up against bankers on ridiculous bonuses

March 29, 2011

It’s people power in motion. They are so upset “their politicians have voted to implement a 100% retrospective tax on all bonuses paid to executives at institutions that received state aid as a result of the financial crisis. In other words, no banker should get a bonus until the debt is cleared, and they should return payments made since 2008.” Way to go, people!

Source of report from here.

Dutch bankers’ bonuses axed by people power

Richard Wachman in Amsterdam
The Observer, Sunday 27 March 2011

An online campaign has overturned ING’s executive pay policy, and the mood in Amsterdam is getting increasingly militant about bonuses at bailed-out banks.

Customers at Dutch bank ING threatened to collectively withdraw deposits in protest against bonuses awarded to executives. Photograph Frank Rumpenhorst/EPA

Britain has a rival when it comes to bashing bankers. After a furious row over pay packages at Amsterdam-based ING in which thousands of customers threatened to make mass withdrawals, the Netherlands is now vying for the title of Europe’s most bonus-hating country.

A growing Dutch political storm could end with a blanket ban on bonuses to financiers who work for institutions bailed out by the taxpayer.

ING customers mobilised on Twitter and other social networks to protest at bonuses paid to bosses at the bank, one of the biggest in the country. The threat of direct action raised the spectre of a partial run on ING, terrifying the Dutch establishment. Fred Polhout, union organiser at the bank, says: “People were outraged. We heard about the bloated sums being paid again in the City and in New York; but suddenly the issue exploded on our own front door.”

Compared with the packages awarded to bankers in the US and UK, the Dutch bonuses were small potatoes. Jan Hommen, ING’s chief executive, was due to receive a £1m bonus – a pittance when you consider that Stephen Hester, head of state-controlled RBS in the UK, is in line for up to £7.7m, Bob Diamond of Barclays is to collect as much as £6.5m, and some senior bankers at Goldman Sachs and JP Morgan are looking at windfalls of about £40m each.

“Perhaps we are so upset because we are a small country that prefers to set an example, rather than follow others,” suggests Polhout.

So severe was the public reaction to Hommen’s bonus that within days he had agreed to waive the award and told other ING directors to do the same.

Now the Netherlands is going through a painful period of introspection and soul-searching. Politicians have voted to implement a 100% retrospective tax on all bonuses paid to executives at institutions that received state aid as a result of the financial crisis. In other words, no banker should get a bonus until the debt is cleared, and they should return payments made since 2008.

ING was thrown a €10bn (£8.7bn) lifeline to stop it going under, while ABN Amro was nationalised. Numerous other Dutch financial firms received capital support, including Aegon, SNS Reaal and ASR Nederland.

On the streets of Amsterdam, there is little sympathy for the bankers. Emma Rohl, who works at an English bookshop in the city centre, says: “They shouldn’t get bonuses at all. Why should people be paid vast sums for going into work and doing their jobs? It’s utterly ridiculous.”

Erick Koenig at a nearby restaurant says: “We rescued the banks from their own follies, and now they expect to be paid extra. I think they should work for free for at least five years.”

At a dusty office in a northern suburb of Amsterdam, Henk van der Kolk, head of the country’s biggest trade union, FNV Bondgenoten, does nothing to conceal his frustration: “Everybody is angry about what happened at ING. The board isn’t in tune with public opinion. What were they thinking of? ING pensioners have seen their payouts frozen, while many employees were awarded a pay increase of just 1%.”

Van der Kolk’s union is pushing for a law that would ensure that executive pay should never amount to more than 20 times the wage paid to the lowest-salaried employee. As for bonuses, the union feels payouts should not exceed 50% of a director’s salary. Hommen’s bonus was worth 92% of his €1.35m package.

“Remuneration for bankers was linked to financial machismo, which encouraged irresponsible lending. We want to get away from the bonus culture,” says van der Kolk.

But given the payouts to ING directors were relatively small, some Dutch bankers are shocked they have received another public mauling.

One ING insider suggests the country was in the grip of a “typically Dutch Lutheran and Calvinist backlash” which cultivates the view that excessive wealth is somehow morally reprehensible and in contravention of traditional Dutch, Christian values. The source says: “We went through this during the boom when ministers railed against stock options and bankers were accused of exhibitionism, and enriching themselves to the detriment of the nation.”

The bankers’ response that high remuneration is vital to retain talent and prevent Dutch financiers from defecting to overseas banks is given short shrift by Polhout. He says: “Let them go abroad if they don’t like it here, there are plenty of clever people who will take their place and work for less. Good riddance, as far as I am concerned.”

Moderate opinion in Holland seems united in its belief that banks which received state aid should not be shelling out bonuses. And Dutch parliamentarians are saying the same thing, demanding the government take immediate action. ING may have made a net profit last year of more than €3bn, but it still owes the taxpayer €5bn.

The uproar against Hommen’s bonuses and those earmarked for the bank’s senior executives have forced ING to rethink its position. Hommen promises no more bonuses till 2012/13 when the bank expects to have repaid all state aid. In a letter to Dutch newspaper De Volkskrant, he said: “We have underestimated the signal we sent to society. [We] have [risked] renewed damage to the recovering trust of our customers.”

Few doubt a critical factor behind ING’s volte face was the boycott threatened by consumers.

A spokesman for the bank admitted the payment of bonuses “prompted a reaction from our customers via emails and telephone messages to our call centres.” But he said only a few hundred people had actually closed their accounts.

Now the ball is in the court of finance minister Jan Kees de Jager, who must decide how to respond to a proposal by parliament calling for the return of bonuses by all executives at state-supported banks. On a recent television show, he said such a law would be difficult to implement and would hit bankers on average salaries who receive bonuses of just a few thousand euros. But in today’s highly charged political atmosphere, de Jager knows that doing nothing is probably not an option.

From → News Comment

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