I’m all for a bonus for a job well done. But the recent debacles in the banking industry beg the question “when is a job well done?”

To me it’s got to reflect the financial benefit to the organisation of the employees work. So if the employee’s work results in a fantastic profit only for the deal to go bad and throw up a loss, should the employee get a bonus for the profit and the company ignore the loss? Common sense says the profits and the losses have to be netted off.

This also implies that people who receive a profits bonus must have the bonus assessed over a period of time which is sufficiently long as to allow the entire transaction to be completed and their worth to the company to be fully evaluated.

Furthermore, a clawback reserve should be with-held from current bonuses to cover against the possibility that the employee’s future activities will make a loss. If this is not done, an employee could simply resign in order to avoid repaying a bonus clawback. And yes, I believe that over paid bonuses must be recoverable!

And this raises another issue. How much bonus should employees receive? Bonuses of £million are hard to justify unless they are a tiny % of the profit created. Employees make profit within an organisation because of the whole organisation’s infrastructure creating the opportunity for the employee to make profits. And don’t forget the organisation’s owners are its shareholders. It seems to me that in the banking industry, senior employees have been feathering their own nests rather than allowing profits to flow through to the owners of the organisation within which they work - and without which they would be powerless to make the profits in the first place.

Who is to blame for this nest feathering? It must be the remuneration committees who decide the bonus levels and the Directors whose job it is to keep a watching brief on the company’s activities – i.e. the Non Executive Directors. And if the Non Executive Directors cannot be trusted to do their jobs, then yes, the industry’s watchdogs which for banks, includes the Financial Services Authority and the Bank of England should have their say.

My comments on risk taking and what is an acceptable level of risk, are for another day ………..