Foreign Banks’ Bonus System under Inquiry

Standard Chartered’s problematic bonus system has raised concerns about foreign banks’ methods of attracting expert employees.

“Mr. Huang has already resigned.” When customers called for the former account manager of Standard Chartered’s Shanghai branch, this is what they were told by the reception desk.

Reportedly Mr. Huang, whose name is Huang Wei, resigned due to dissatisfaction with Standard Chartered’s method of determining bonuses. Journalists acquired emails between Huang Wei and his supervisor, from which we know that Huang Wei successfully helped Standard Chartered Shanghai branch obtain deposits amounting to 800 million yuan (USD 123.36 million). According to his employment contract with Standard Chartered, he should have received a bonus of 105.9 thousand US dollars. However, to his dissatisfaction, the British bank only permitted him 20,000 US dollars.

When journalists planned to contact employees of Standard Chartered, they refused to answer questions with respect to the bonus system.

Compared to Chinese banks, which place stress on the importance of employees working experience, foreign banks set up strict awarding systems, which allows employees certain benefits if they work hard, resulting in a lot of stress.

“Standard Chartered China relies on its financing products. In comparison with Chinese banks, foreign banks have problems attracting deposits in China,” says a worker of Standard Chartered. “In order to attract more customers, Standard Chartered has to provide higher quality products. This increases costs for banks, forcing them to think carefully about  employee's salaries,” says an expert.

Disputes about bonuses

The disclosed dispute between Huang Wei and Standard Chartered regarding his bonus started at the beginning of this year, when he knew that he could only earn 20,000 U.S. dollars for his contribution to Standard Chartered last year. “We know that the branch I serve had the best performance among all the branches of Standard Chartered China. I helped the bank attract deposits of 800 million yuan, which brought in 1.7647-million-yuan income (USD 271.1 thousand). Based on my employment contract, I should be given a of bonus 105.88 thousand U.S. dollars,” said Huang Wei in the forum.

However, after getting the bonus in February, Huang Wei found that Standard Chartered only paid a quarter of the bonus he believed he deserved. Standard Chartered said that the bank received no benefits from the business Huang Wei conducted. But Huang Wei believed that the deposits were not only related to the bank's profits but also with the deposit-loan ratio.

Another question raised by Huang Wei was about the standards for determining the bonus. He thought the bonus should be calculated with the 2010 standard instead of the 2011 standard. However, the bank opposed this view.

Huang Wei said that the customer who deposited a large amount of money in Standard Chartered was taken from Pudong Development Bank where he worked before. He cannot stand that he didn’t receive what he deserved and that the banks broke their promise they made when hiring him.

Stress of deposit tests bonus system

“This is related to the system,” says an expert. The incentives given by different bonus systems are the source of the problem.

Foreign banks were under great stress when soliciting deposits last year because of the Chinese government’s regulation regarding mandatory deposit-loan ratio for banks. Therefore, foreign banks had to find a way to encourage their employees to acquire more deposits. When Huang Wei obtained deposits of 800 million yuan, Standard Chartered was longing for this type of retainer.

An insider says that foreign banks usually set up periodic goals for their account managers, who are required to attain a certain amount of deposits in a certain period. The banks usually give bonuses to the account managers who successfully achieve these goals.

But there is no common standard among the banks concerning bonuses. Each bank has its own system. In addition, banks completely control the bonus system while employees have no say in it.

“If you still want to work for the banks, you have to follow their orders. If you want to leave, that is no problem for the banks because many others can fill your position,” says one of Standard Chartered’s employees.

“Our incentive system is not limited to monetary bonuses. We usually write emails to those employees who work hard to tell them ‘you’ve done a good job’. I think it is an effective method of rewarding employees as well,” says a senior executive of Standard Chartered (China).