In December there was an article in the Financial Post which described the bonuses being paid to bankers in 2012. To quote the article, “Royal Bank of Canada and National Bank of Canada led the 7.5% surge in bonus awards among the country’s lenders this year, bucking a global trend of pay cuts on Wall Street and London.”
I know that the Canadian Banks have been doing well so maybe these bonus awards are in line – but are they?
I looked at RBC’s 2011 financial statements (2012 were not available yet). In 2011 RBC had total revenue of $27.43 billion and recorded a net income of $6.7 billion. Of the $27.43 billion of revenue, $8.95 billion was paid out for “Human Resources”.
Human Resources include salaries, variable compensation, benefits and stock based compensation. As a percentage of total revenue, human resources were 32.63%. From a business point of view this doesn’t seem out of line. What is interesting is that if you take their net income and add their Human Resources payout you get $15.65 billion. This is the amount of money that’s available to split between shareholders (the owners of the company) and the employees.
If you then look at the percentages, employees get 57.2% of this amount whereas the balance of 42.8% is available for distribution to shareholders and for reinvesting back in the business.
From what I can gather from their 2011 financial statements they paid out about $3 billion in dividends which is about 45% of net income. Or about a third of what was paid to the employees.
When I think about them increasing their bonus awards 7.5% I have to wonder what the owners got for their trouble. Well the answer is 5.56%. That’s the percentage increase of the dividends in 2012.
Interesting isn’t it? The owners take all the risks and the employees enjoy more of the benefits. Maybe we should all go work at a bank!