Article contributed by: http://www.PropertyBuyer.com.sg
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Throughout the world, bankers are paid huge salaries. No doubt the
organisations are huge, therefore in order to manage organisations of such
enormous size, you will need someone of enormous talent.
For such enormous talent, you will then have to pay millions, even hundreds
of millions. This is true even for national banks or quasi-national banks.
Does this Logic hold water?
We think that the relationship between bigger organisations and pay is not
linear. Managing a 1 man company requires not so much skills as opposed
to managing a team of 300 people. But between managing 300 people and
3000 people, there is yet again a skill pre-requisite.
However from managing a team of 3,000 people to 30,000 the incremental
skills required for that may be marginal. As a result the salaries increase for
that types of roles should also consequently be marginally higher, not that
much more.
Why the logic doesn't hold water, If you extend this logic more, then the US
president which presides over a USD$ 14 Trillion economy and 300 million
inhabitants should perhaps demand US$ 500 billion in annual salary.
Even using Singapore's Char Kway Teow analogy, where it is claimed that
it's only $2 a person a year for good leadership (Just the cost of Char Kwya
Teow), that means that we should pay the US president $600 million or (0.6
billion dollars).
Greed takes Over
When some companies are obviously better off being split into smaller and
nimbler companies when they grow too big. Instead the management
insisted that they are better off being the big organisations that they are.
However way they structured it or argued, the logic is tenuous.
Because the organisation is so big, this necessarily entails a very HIGH pay
for the top few layers of management. The argument is often that these are
talented people and they manage such a big team.
In fact the executive's time is same as everyone else, just 24 hours a day.
No matter how capable he or she is, he/she doesn't do the actual work. He/she has
someone reporting to him/her to carry out the work, while he/she sets the direction. Because the business is so big and
contains some many business units and divisions whose head of Business Units are already setting the strategy and directions,
so we don't see why there should be someone sitting yet on top.
BANKS and their SHARE OPTIONS
We cannot really blame the bankers, the system encourages greed. With
employee share option schemes, it encourages executives to BOOST
earnings.
The boosting of earnings can come in many ways.
1) Real earnings through best practices and ethic businesses practices.
2) Real earnings through taking excessive risks on behalf of the banks. (If
the risk pays off, the bankers get a big PAY cheque)
3) Create accounting profits, that are nonetheless legal, but will need to be
write down or accounted for in later periods.
4) Create outright fraud.
Now, because the regulatory oversight has failed in the USA, banks have
largely become "Bankrupt" and that has deprived many home owners and
businesses from credit (i.e. funds and borrowings).
We strongly condemn such activities, but these are systematic failures in the
systems. Checks and balances has also failed in the US with the republican
lobbying for more tax-cuts on behalf of big and profitable businesses and a
FREE Market knows best logic. That has obviously not worked.
We are hopeful that President's Obama stimulus package will clean up this
mess. But we are not happy that the package was watered down by
including tax-cuts in the package as a result of concessions to the
Republicans, that means that actual package is smaller than it is actually
stated. Tax cuts does not immediately create employment and the logic of a
trickle down economy has been given 8 years of trial and failed.
What does this do for Singapore Mortgages?
Singapore banks have also started to invest for higher returns and some of
them got caught out by Lehman brothers and others. Most of Singapore's
properties are backed by CPF and are by and large more resilient to
sub-prime mortgages. But Singapore's banks are not immune to global trade
and credit tightness. Singapore has a high number of expatriate workforce
and is highly dependent on external trade, And as a result, credit has also
dried up. Many Singapore home loans and home owners are faced with
banks becoming more and more stringent in lending out money.
If you have a home loan in Singapore and are considering to REFINANCE
or are thinking of getting one, we are a research focused mortgage advisory,
our service is free to you because the bank pays us separately.
AMAZON Property and Finance Books
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