Wednesday, January 12, 2011

Is Steven Gerrard really worth more than Bob Diamond?

Bankers bonuses are in the news again as banks start to announce their bonus pools and the general public fails to understand why they’re so big.

First up to announce bonuses appears to be Barclays, a bank which remember, didn’t take a government bailout. To thunderous condemnation from the left their Chief Executive Bob Diamond will apparently receive a bonus of approximately £8m on top of his £1.35m annual salary and the overall bonus pool for all staff will be £2.5bn.

By comparison it’s estimated that Liverpool captain Steven Gerrard earns a weekly salary of £120,000, equating to £6.24m a year. So what you say, Bob earned more than that in bonus alone this year.

But let’s look at it another way. In theory the highest paid person in an organisation is the one that should be most responsible for the performance of that organisation so how have Barclays and Liverpool, or Bob and Steven performed?

In 2009 Barclays made a pre tax profit of £11.6bn, much of this was due to selling off Barclays Global though, so if you discount that then pre-tax profits were actually £5.3bn. Full 2010 figures aren’t available but the first half of 2010 saw pre tax profits of £3.95bn so as a guess let’s double that to reveal profits of £7.9bn. As a reward for creating those profits Bob Diamond (who earned no bonus last year or the year before) has earned a total of £9.35m which is 0.1% of the profit.

By comparison Liverpool made a profit in 2008 of £8.3m on a turnover of £159.1m (This is the only year I can find figures for although 2009 turnover was apparently up to £184.8m). Presuming 09 profits went up in line with turnover to £9.6m and generously 2010 profits went up by the same percentage again to £11.15m (unlikely), then Steven Gerrard was rewarded for creating those profits with 55.9% of them. (I know he wasn’t technically because his salary was in the costs, but go with it)

So Bob Diamond who created £7.9 billion pounds worth of profit was rewarded with 0.1% of it, whilst Steven Gerrard who was responsible for just £9.6m was rewarded with 55%. Even if you say he was responsible for turnover (given that profitability was not his responsibility but management’s) then he was still paid 3.4% of turnover (30 times what Bob earned as a percentage of profits) .

I know the comparisons aren’t really direct but you don’t see everyone in the country, and especially the media screaming in the same way that footballers shouldn’t be rewarded the sums they are. Despite the fact that they produce significantly less economically than bankers and are rewarded significantly higher percentages.

Bootnote: Harriet Baldwin MP just tweeted a reminder that for every pound of bonus paid the revenue will get 62.8p in income tax and employer’s National Insurance contributions so those £2.5bn of bonuses will net the exchequer £1.7bn of cash to play with.

Related Content

1 comment:

  1. To some extent I think that you are missing the point: Gerrard is the icon of Liverpool, indeed their very Brand Image. In that sense he’s far more important to the club than Barclay’s CEO who could probably be replaced by another dozen people all much of a muchness. The real question is whether relative to their size, Barclays have performed better or worse than the market in general: my understanding is that Barclay’s share price is somewhat in the doldrums so that it would appear that the City at least isn’t overly impressed.