Northern Rock

Northern Rock Name: Institution: Can high salaries be justified for the senior management of Northern Rock? Should senior management pay be regulated? Northern rock is one of the savings bank in Britain, and has been on the lime light all for the wrong reasons, especially in the wake of the economic recession of the year 2008. As a result of the mortgages subprime crisis that hit the bank, the government took the matters further and nationalised the bank to save it from collapse (Islam 2007). This was due to the lending rates that the bank had dived into, offering its customers mortgage loans that were worth more the the properties they were purchasing. Majority of the customers that were extended these loans had no regular way of servicing these loans, so when the recession hit the global market, the bank felt it the most as opposed to its competitors. One of the most contentious issues that have irrupted in the past is that of the senior managers being offered high salaries, even after the bank cost the taxpayers millions of pounds. Despite the fact that the bank made a loss of more than one and half a billion pound (£ 1.4 billion), it is now clear that the senior staff and some of the junior staff will enjoy some bonuses. Various sources on the news indicated that the juniors who would benefit from the pay rise, would take home more than ten percent (10%) in bonuses. This was in form of the loan notes and not cash and it would have to be deferred to the year 2010 (The Economist 2007). This rise was as a result of the banks’ ability to clear much of the loan that it owed to the government. For the senior officers in the bank the same is the case although, some of them were the ones that lead to the banks downturns in the year 2008. One way of looking at the bonuses is as a sign of gratitude to the senior management who have worked very hard to bring the bank back on its feet. These bonuses will thus be as a motivational factor to the managers so that they can even take the bank back from the government. Although the bank did bring losses that cost the tax payers lots of money, it is not practical to victimize the managers for ever (Parliament UK 2013). In reality it does of mean that the bonuses are a way of thanking the managers for the mistakes, but rather a means to recognise their efforts and encourage them to grow even further. As such it is only justifiable to increase of award the senior management bonuses as a sign of recognising their efforts. Equilaterally, it is important that the senior management’s salaries are regulated with reference to their performance levels. As the Northern Rock reported there is going to be some form of criterion that is going to be used to select the staff that are eligible for the bonuses. The government also mentioned that all those senior staff that had been involved in the run down would not be recognised. Looking at the figures that some of the top officials take home at the end of ...