For those who don’t know, Chelsea Football Club of London has just been banned by international football organization FIFA from recruiting any new talents until January of 2011 for allegedly pushing a young French footballer to breach his contract with his former club, Lens, to be able to move to the English club.
A Telegraph assistant editor has an interesting take on its relation to bonuses in the City, basing it on comments given by a City veteran Sir David Arculus.
At a “Business for New Europe” conference this morning in London , Sir David suggested that much the same sanctions be applied against banks. In indecent disregard for the crisis in the world economy they have just caused, City investment banks are again actively bidding up already obscenely large pay rates by seeking to poach top teams and traders from one another.
Sir David has intimate knowledge of how this process works, as he was once a non executive director of Barclays. In banking as in football, top pay tends to be determined using comparitor yardsticks. If your main competitor is paying so much, you have to pay the same or more to retain your top people.
One of the reasons why historically banks have tended not to try and take one another over is that they are frightened of what skeletons in the cuboard they will find if they do. Experience during the banking crisis has only served to validate this line of thinking. Attracted by apparently bargain basement prices, Bank of America acquired Merrill Lynch and Lloyds TSB took over Halifax Bank of Scotland. In both cases, it was only a matter of weeks before realised they had bought pigs in a poke.
So rather than buy the bank, City firms buy the people, in the manner of the football transfer market. As a consequence, salaries go up and up in an apparently unstoppable process of bonus inflation. Nobody has yet worked out an effective way of stopping this socially unacceptable process, but Sir David’s idea – that banks caught inducing teams to ditch existing employers by offering guaranteed bonuses be banned for periods of time from further engagement in the recruitment market is not a bad one, even though he may not have meant it entirely seriously.
I don’t quite follow. Bankers are hired without a certain term limit, as most footballers are for one summer, for a year, or for five years. While one can easily understand how Kakuta’s move is a breach of contract and Chelsea’s inappropriate, it eludes me how changing employers is in any way a breach of contract. At best, it’s a sign of disloyalty. Then there’s the banning from recruitment. What kind of lunacy is that? And the issue on bonuses: Yes, top bankers are attracted through high pays, so are footballers. So what? That’s simply how the system goes. You don’t really mind those who can afford from buying high-class luxury items only to replace them later on with something better, something more expensive, do you? (And yes, those bankers are in one form or another a luxury.)