Dutch People Are Different - ABN Amro Employees Want To End Bonus Scheme

We always shudder slightly when we discuss ABN Amro, since nothing ever seems straightforward in the ongoing saga of the Dutch bank. However, this time at least nobody has died. In 2015, we noted that Chris Van Eeghen, head of the bank’s corporate finance and capital markets “startled” friends and colleagues after the “always cheerful” banker reportedly committed suicide. Van Eeghen was the fourth ABN banker suicide since the financial crisis.

When it comes to bonuses, ABN also has a chequered history. The Dutch government nationalised the bank at the height of the financial crisis at a cost to Dutch taxpayers of 22 billion Euros. There was a national outcry in 2015 over bonuses ABN paid to its top executives, as Business Insider reported.

Public outcry over bankers' bonuses is pretty common, but the anger sweeping the Netherlands, over nationalised ABN Amro's executive pay packets is on a completely different level. Over the last week, Dutch newspapers Financieele Dagblad and NOS (Holland's version of the BBC), and other media outlets were awash with debates over the justification of how ABN Amro’s high ranking executives were getting huge bonuses ahead of the bank being re-privatised.

 

In fact, the outcry was, and continues to be, so bad that Dutch finance minister Jeroen Dijsselbloem delayed the IPO of the nationalised bank at the end of March because the row over giving six executives a €100,000 (£73,000) bonus on top of their salaries escalated so greatly.

 

He even went to parliament on Thursday to answer questions over how the government is "allowing" the bank to pay hefty bonuses, compared what the average Dutch person receives in a year, even though it is still yet to be privatised, after being taken over by the state in 2008.

As we said, nothing is ever straightforward with ABN and Dutch financial newspaper, Het Financieele Dagblad, is reporting that Dutch bank ABN Amro is poised to scrap the bonus system for almost all of its roughly 20,000 staff. Unusually, the calls for ending the bonus scheme came from the staff, not ABN management. According to dutchnews.nl.

ABN Amro bank is planning to overhaul its current bonus structure for the 17,000 members of staff who are covered by a formal pay and conditions agreement, the Financieele Dagblad said on Thursday.

 

The paper bases its claim on people involved in the current talks between unions and the bank on a new pay deal (CAO) for 2018. A spokesman for the bank told the paper (that) company surveys showed a large part of the bank’s personnel want to get rid of the ‘performance-related bonus’.

 

‘We want a complete new structure: no performance assessments and no performance-related bonuses,’ he said.



How very “equitable”…as long as they’re happy. There will be a few exceptions, however, although that doesn’t include the board of directors, since the Dutch state still owns 56.26% of the equity through the NLFI investment vehicle. The directors are prohibited from receiving bonuses until the state disposes of its holding. Dutchnews.nl continues.

The plans will cover all members of staff who are paid according to the CAO (collective labour agreement). Around 100 specialists, including traders and corporate bankers, will still be eligible for a bonus. The bank’s board do not qualify for bonuses because the Dutch state still owns a majority stake.

 

The FD says the bank’s plan is in line with developments elsewhere in the financial services sector. Former finance minister Jeroen Dijsselbloem fought hard against the bonus culture, which he saw as a major cause of the financial crisis and introduced a 20% of salary ceiling.

Even Dutch bankers, it seems, aren’t totally magnanimous as negotiations between unions and the bank are continuing with staff demanding a 9% pay rise as compensation. We’re not sure precisely what’s behind the motivation of ABN’s staff, although it could have something to do with the bank’s interminable restructuring. As Bloomberg noted following the release of its 3Q 2017 results.

ABN Amro Group NV fell the most since May after the Dutch lender reported a third-quarter decline in earnings from banking and a capital ratio that fell short of estimates. The stock dropped as much as 3.3 percent in Amsterdam trading and was down 1.8 percent as of 9:15 a.m. Net interest income declined 1 percent to 1.57 billion euros ($1.82 billion), which is about 2 percent below consensus estimates, according to a Kepler Cheuvreux note.

 

Chief Executive Officer Kees van Dijkhuizen has focused on lowering costs while the bank seeks to grow its domestic retail, private-banking and investment units…While net income beat analyst estimates, much of the result was driven by cost cuts. Operating expenses dropped 12 percent in the third quarter from a year earlier, the Dutch state-controlled bank said in a statement on Wednesday.

 

The former global banking giant was cut back to a largely domestic Dutch lender in the wake of the financial crisis and the CEO has focused on lowering costs while the bank seeks to grow its domestic retail, private-banking and investment units. The shares have climbed 23 percent since the beginning of the year, when van Dijkhuizen took over.

Comments

EuroPox Fri, 12/01/2017 - 04:57 Permalink

‘We want a complete new structure: no performance assessments and no performance-related bonuses’. I bet everyone will work REALLY hard if that happens.  Oh, wait....

Endgame Napoleon Thoresen Fri, 12/01/2017 - 10:19 Permalink

In most US companies, one manager who is paid 5 times more than the salespeople gets the real bonus, the bonus that is 20 or 30 times higher than any sporadic, minuscule bonuses handed out to salespeople in ways that are designed to increase rancor and meanness among underperforming salespeople.

The manager holds the tiny, irregular bonuses over the heads of the low-performing salespeople, loudly saying so-in-so sold this much, while you are only at la, la, la. Why can’t you be like this high-selling employee? Or in larger workplaces, they post the sales totals on a big digital board, with the manager using this as a device to prod people between her/his lengthy, excused absenteeism jaunts for busy-working parents.

This humiliation-as-motivational-tool approach is [deceptive] as far as job longevity is concerned for the hard-working, quota-meeting salespeople. This Fake praise does not mean that the quota-hitting salespeople who actually show up every day and work through the entire day, rather than being absentee mornings, afternoons, days and weeks for kids, have any job security whatsoever. Sure, you get a bonus once in awhile, heavily advertised by the manager to prod others into working harder, and the lowest selling and most absentee colleagues often hate you for it.

In many cases [not all], that bonus-enriched manager is absentee A LOT for kids, just like about half of the staff, and interestingly, the salespeople that absentee managers choose to retain are often the fellow frequently absentee moms who NEVER meet their quotas due to their excused absenteeism.

Sales is a numbers game; the people who make the most calls [etc.] are the ones with the high sales. You cannot do that while getting your shopping done to beat the traffic after you leave work at 2:30, saying it is for baby, even though a fawning grandma, in reality, picks up your baby, in addition to keeping your baby on your lengthy and equally excused trips with hubby/boyfriend.

These managers churn high-selling, hard-working salespeople, making sure to eliminate any perceived competition for management slots, while using them to keep THEIR numbers up. This secures their MASSIVE bonus. They do this by pumping the hard workers up with Fake verbal praise to get them to generate and retain a maximum number of accounts before churning them in ways that are usually underhanded and bullying, resulting in no Unenployment Conpensation even to cover rent between churn jobs after all of that hard work.

If it is not this kind of inside sales churn-mobile, it is a pyramid scheme, where salespeople must pay for recurring licensing expenses, leads, etc., working on straight commission with no benefits, with about 10 people they never even met taking a cut out of every small commission check. Many companies also charge back, making the agents pay them if policies cancel.

That is the only reason why I agree with these Dutchmen. Bonus structures can be gamed in blatantly unfair ways that undermine hard work and production. I also do NOT think that humiliation tactics for low-selling employees who are sometimes lazy and corrupt cronies, but are also often just novices who might be good at sales if given a chance, are effective. That approach is brutal and ineffectual [by design]. They can always find more hard-working, high-selling chumps to churn between babyvacations to keep their numbers up.

In reply to by Thoresen

inhibi Endgame Napoleon Fri, 12/01/2017 - 10:27 Permalink

Performance bonuses are ironic - they seem to go up every year even though the c suites get worse and worse.People dont work for bonuses - get it? They literally dont work, take the work of the little guys (analysts, engineers, pm's, etc), slap their name on it, attend some meetings, and make more in their bonus than the analysts or engineer takes home the ENTIRE YEAR.The bonuses paid to the little guys is usually pathetic, capped at 10% and mostly around 3-6%/yr. even at high profile firms.Barely covers the cost of inflation.Instead of bonuses, there should only be merit based raises, but of course the vulture-like PE firms would never allow it. They love feasting on companies during a downturn, installing a puppet CEO and paying themselves massive bonuses while they lay off half the firm. Happened 25/8 during the housing crash.So fuck bonuses and the people that think that it makes people work.

In reply to by Endgame Napoleon

RichardParker Endgame Napoleon Fri, 12/01/2017 - 13:43 Permalink

These managers churn high-selling, hard-working salespeople, making sure to eliminate any perceived competition for management slots...I believe that is called "Tall Poppy Syndrome".Even worse, said managers will not let you transfer because they know you're too valuable to let go, hence a lackluster performance review.  Saw a lot of that working in a technical field. 

In reply to by Endgame Napoleon

Ghordius Fri, 12/01/2017 - 05:00 Permalink

three things, here

1. the EU "Banker Bonus Cap"

2. it's true. lots of people are not keen on that bonus thing. research on that exists that the "incentive" effect is a very hyped-up thing

3. banks... as facilities, utilities. like waste disposal, electricity, etc. the real economy needs Boring, Stodgy, Bureaucrat-like Bankers. those others, the punting "Masters Of The Universe"? see "Glass-Steagall Act"

EuroPox Ghordius Fri, 12/01/2017 - 05:08 Permalink

You're gonna have to trust me here Ghordi - when I knew that my bonus was going to be directly related to the fees I was able to generate and the amount of new business I was able to secure, there was a REAL incentive to get out there and do it.Just like other industries, bankers are salesmen.  If you had a waste disposal salesman who signed up more clients than anyone else, wouldn't you be willing to pay him/her a bigger bonus so that the competition did not poach him/her?

In reply to by Ghordius

Ghordius EuroPox Fri, 12/01/2017 - 05:21 Permalink

fine for me, with one exception. banking should not be "like other industries"

a banker-salesmen makes a contract lasting 20 years. the bonus on it... is paid immediately. the true outcome... is in the future

you see? wrong incentives to start with

particularly when the same bank is tied to the state, by ownership or currency or taxpayers having to bail it out

Glass-Steagall. separate the Stodgy from the Dazzling Private RiskTakers. again

In reply to by EuroPox

aurum4040 EuroPox Fri, 12/01/2017 - 06:15 Permalink

The real problem is in fact the bailouts. Or is it? Is the bigger problem the hyper financialization of nearly everything, specifically a la pre- GFC - CDO's, CDS'S, MBS's, IRS's, etc. effectively leveraging the entire system to 'print money'? TBTF being the result - resulting in tax payer funded bailouts. Pensions, retirement funds, 401ks, assets hard and soft would have been wiped out. World wide chaos would have ensued for a period of time. Would the world be a better place now if the system failed? Perhaps, perhaps not yet. Eventually yes. The failure would have made 29 look like a flash crash....Overall hyper financialization creates an environment that 'cannot' fail. And thats a serious problem.  

In reply to by EuroPox

EuroPox aurum4040 Fri, 12/01/2017 - 06:23 Permalink

Entirely agree.  It would have been chaotic had they failed but the world would have gone on and the problem would (given some time) have been resolved.  By not allowing the banks to go bust, we still have all the problems you mention - except on steroids!  Now the banks are MUCH too big to fail but fail they will and yes 401ks etc. will be wiped out.  Many people have been dragged into the net in the last 10 years who would have survived in 2008 but now will not.

In reply to by aurum4040

PT aurum4040 Fri, 12/01/2017 - 06:36 Permalink

It all started when banksters no longer cared whether or not borrowers could afford to repay.  "Performance" bonuses were based on money lent out, not money paid back.Why did the banksters no longer care if borrowers would repay?  1.  Because they offloaded the risk - sold to the muppets and then lent to someone else.2.  Because the ratings agencies misrated the risk and deceived the investors.3.  And eventually, because they got bailed out anyway.It all started with mortgage bonds, CDOs, CDSs, synthetic CDOs, CDO2, and ratings agencies that were too afraid to do their job lest they lose customers.Oh, and4.  Because the banksters were getting bonuses for lending money whether or not that money got paid back.  Banksters want bonuses?  Sure.  AFTER the money gets paid back.  Maybe after ALL the money gets paid back and then perhaps they won't get so excited about 40 year loans.But again, most companies just pick an employee of the month and give him recognition in front of his peers and a plastic plaque.  What?  That doesn't work?  Someone should tell ...Side note:  In one company I worked for, the Employee of the Month quit two weeks later.  Another one was the most stressed-out, highly strung person I knew at the time.  Not exactly the best recommendation for working for the firm.  How about the threat that if they do not perform in their bankster job then they may end up with a job in a real company?  Would that be incentive enough???

In reply to by aurum4040

KnightTakesKing EuroPox Fri, 12/01/2017 - 07:45 Permalink

@EuroPox @Ghordius  If you want to understand what motivates people in the creative fields -- meaning work other than 'piecemeal' you should watch this video by Daniel Pink:https://www.youtube.com/watch?v=rrkrvAUbU9YIt's not logical, but performance incentives -- not only do they not work, but they hurt overall performance versus having no incentives at all. Counter-intuitive, but the science clearly proves this.

In reply to by EuroPox

Faeriedust EuroPox Fri, 12/01/2017 - 20:43 Permalink

Well, Pox, that IS the problem.  We need bankers who aren't salesmen.  People who just keep track of the funds and shift them from one pile to another as needed -- good housekeepers, NOT con artists and fast talkers.  In fact, that's what we need in waste disposal, too.  And in industry.  Even real estate.  Economies that are based on stolid, unimaginative, plodding peasant virtues of doing the next thing in line and putting one foot in front of another reliably, dependably, and perpetually, build more REAL wealth (best seen as infrastructure) over the long term than economies of comet-like brilliance bursting into the sky . . . and then scattering into a million pieces.Salesmen are only needed when you have to convince people to misallocate resources from things that they need and want on their own initiative, to the things that someone else wants them to invest in.  America has spent the last century depending on salesmen to convince people both domestically and overseas to spend money they didn't have on things they didn't really want or need.  This led to an orgy of excess consumption of resources that could have been better spent slowly and carefully.  It led to sheer mountains of waste (check out the New York Times this week on the world's problems with garbage disposal). It made salesmen and their bosses very rich, but it made society as a whole poorer.  And it led to the dominance of society by greedy short-term thinkers with the average maturity of a sixteen-year-old boy. Think of Zuckerberg as a classic example of this genre.  Meanwhile we ignore the people like Charles Koch, who (while I may disagree violently with his politics) THINK CAREFULLY and BUILD REAL THINGS.

In reply to by EuroPox

Batman11 Fri, 12/01/2017 - 05:33 Permalink

If you give bankers a reward structure where:1) It is asymmetrical, and they get bonuses on profits but there are no claw backs on loses.2) The rewards are so high they can set themselves up for life in a very short space of time.You’re all set up for 2008.They look for a long cycle time bubble they can blow, like real estate.They think how they can leverage it up in a way that no one realises what is going on, like complex financial instruments.Bankers have revealed the problem with asymmetrical reward structures and excessive remuneration.We call it the great financial crisis and the global economy still hasn’t recovered.

Funn3r Fri, 12/01/2017 - 05:49 Permalink

Yep I was at a bank where we sold mortgages on bonus. Are you a deadbeat worthless alcoholic with zero chance of ever paying anything back to anyone? No problem! Sign here for me to get bonussed, and yeh when your SHTF I'll be long gone. Thanks!

Joe A Fri, 12/01/2017 - 06:06 Permalink

I don't see so much outrage on this in NL. A bit hyped in my opinion. People are more upset with politicians going to perform public functions after they leave politics, totally fuck up there and then get big fat bonuses or a cushy job in Brussels.Latest toe curling issue is that the government wants to scrap the non binding referendum and don't want to have a referendum on that. Parties that were once supporting the referendums are the ones that want to scrap it the most. They also buried to plan for a full binding referendum. They didn't like the outcome of the referendums, you see. Anyway, for the time being anybody can organize a referendum as long as you get enough signatures. The next referendum scheduled is about a full data mining sweep on the internet is the struggle against terrorism. Of course, all in our own interest. That one is scheduled for March 2018 when there are municipal elections. I hope that a referendum on scrapping the referendum when then also be on the ballot.

Calculus99 Fri, 12/01/2017 - 06:56 Permalink

The Dutch saying no to money is just not believable. Copper wire was invented by 2 Dutchmen fighting over a penny. They're also very clever so don't fall for it.Just because you don't get a bonus doesn't mean a cut in pay. It could actually lead to higher pay... 

any_mouse Fri, 12/01/2017 - 07:38 Permalink

The first sign I saw of the oncoming bank crisis was when the local bank branch in a Detroit suburb supermarket had put up a ABN Amro sign.

It was tulip mania for small banks.

zvzzt Fri, 12/01/2017 - 07:51 Permalink

As a former employee of ABNAMRO, let me go into some detail about the bonuses they hand out and how they work (unofficially, of course). Simplefied version:- based on performance of the bank as a whole (or main subdivision, not your own profits)- biggest part of the bonus calculation is made on "personal engagement", eagerness to learn and develop and reaching targets you have set for yourself. Can be anything from making the CFA certification or learning a new language or finishing an Excel programming course or whatever. - Everybody gets the middle road bonus tier 1 through 5: 0%, 5%, 9%, 15% (or 20%, cant remember). So effectively every gets a 9% extra. Getting a 0% bonus is equal to a 'pink slip'. I havent heard of anybody getting a top tier bonus over the years.  The reason employees dont want the bonu structure anymore is because it is a farce. If you do really well you'll never get top tier and if you do average, you still get the middle tier of 9%. It is a farce and a hassle and takes way too much time. Fun anecdote (and it's really a true story): In 2008 we had a meager year, so during the end-of-year review I mentioned that the whole desk, including me, should not receive a bonus at all. Boss was terrified "that's not possible, you must get the bonus, it is already calculated in". So I said, "Well, give it to charity or the Red Cross. Next year if we outperform I want a double bonus". "You are insane, that's not possible. That's not how things work here", he said again. So I ended with "so what exactly is the purpose of the bonus if performance makes no difference at all? It is just a large tip or handout to keep employees happy and to augment their (lower) salaries". With a sullen face he replied: "yes, I guess so". I rest my case... Talk about ending the bonus structure is as old as the road to Rome... Also interesting, tehre was a discretionary bonus for exceptional performance on an individual basis. Fixed amounts and VERY hush-hush. I was not allowed to talk about recieving such an extra  bonus with my collegues. The whole bureaucracy and total lack of stimulation of performing personel was my main reason to leave. I just couldn't cope with the dusty attitude. Reseachers, traders and staff that didn't perform or nobody listened to were promoted to a different unit or placed in a corner somewhere. Firing? "No, we can't do that. They only have 7 or 8 years until retiring...." Guess what kind of effect that had on the trainees, dynamic youngsters and newcomers.... All the motivated and good guys left in a year or two (at most). 

williambanzai7 Fri, 12/01/2017 - 08:30 Permalink

Their problem is they want to look like swinging dicks. But there are way too many swinging dicks in swinging dick town as it is. And they never were real dick swingers were they?

They should be tulip farmers....wait a minute.

Ok, Eurocrats. That's the ticket.

Faeriedust Fri, 12/01/2017 - 20:29 Permalink

Most employees in most places I've worked recognize "performance" bonuses as a farce.  Even if your manager evaluates fairly -- and none of them do -- they almost never depend on your own work; rather they're an average of the entire work unit from blazing stars down to ass-draggers.  Second, for non-executive level employees, they're middling to insulting in amount.  Third, they're an excuse to reduce your actual wages, while fourth, the lump sum payment acts to increase your withholding (bonus checks are taxed as if you made that amount EVERY WEEK). Finally and overall, they mostly seem linked to the nebulous  performance not even of the company or unit, but the economy as a whole, as sales and therefore profits are driven less by how hard anyone works, than they are by the general availability of spending money.So here's a fact for free-marketeers and small business-owners to suck on: most conventional wisdom regarding employee management is bullshit.  Most incentive programs are being laughed at behind your backs.  And most employees aren't going to work any harder because you offer them a gold star.  We got enough gold stars in kindergarten.