Foreword:
A few days before the New Year's Day holiday, everyone was still looking forward to having a good holiday, but unexpectedly, China Merchants Bank suddenly "reversed" the recovery of last year's performance pay from some employees before the year, which attracted widespread attention. This article will analyze the "reverse" salary bargaining incident of China Merchants Bank, and the necessity of reform of the performance appraisal mechanism of the banking industry.
1. China Merchants Bank's "reverse" salary bargaining has attracted attention
Just a few days ago, China Merchants Bank suddenly issued an announcement on the company's intranet titled "Proposal on the Recourse and Clawback of China Merchants Bank's 2022 Performance Compensation", announcing that the proposal was unanimously passed. According to the announcement, in 2022, a total of 2,876 employees of China Merchants Bank will be reclaimed and deducted from the performance-based remuneration obtained last year, with a recovery amount of up to 58.24 million yuan.
This means that the salary of nearly 60 million yuan is actually "loaned" by the employees by China Merchants Bank, and not only will it be refunded in full, but it also means that these employees have more or less certain problems at work. It can be said that China Merchants Bank's "reverse" salary bargaining has aroused widespread attention in the industry.
Second, "reverse" salary bargaining is not an isolated case
China Merchants Bank's "reverse" wage bargaining is not unique to the banking industry. In fact, in the annual reports released by banks this year, many banks have revealed that they have implemented a performance pay recourse system. For example, the Industrial and Commercial Bank of China will recover the performance pay of employees who have "risk losses", and the Jiangxi Bank will also recover employees who are "responsible for the formation of non-performing assets".
This recourse mechanism is not new. As early as 2010, the China Banking Regulatory Commission (CBRC) issued the Guidelines for the Supervision of Prudent Remuneration for Commercial Banks, requiring banks to establish a recourse mechanism for performance-based compensation. In 2022, more than 95% of banks and insurance companies have established and implemented this system.
It can be said that China Merchants Bank's large-scale recovery of employee performance-based pay is only a manifestation of the full implementation of this mechanism, and it is by no means an example of the banking industry.
3. Reasons for establishing a recourse mechanism
So, why should the banking industry establish a recourse mechanism for performance-based pay?The main reason is that the bank's business is inherently risky, and an over-emphasis on short-term performance may lead to staff neglecting risk management in order to meet performance targets.
For example, a salesman has completed this month's performance indicators by frantically pulling, but in fact, the quality of customers absorbed is not high, and there may be a risk of early withdrawal or even running away in the futureOr for the sake of lending performance, lending to some customers who are actually difficult to recover. After the completion of the short-term business volume, the clerk has achieved good performance, but the bank may face the risk of not being able to recover it in the future.
If there is no recourse, employees can take short-term risk-taking operations to make a profit and leave, and the risk is ultimately borne by the bank. Therefore, the recourse mechanism can restrain employees' moral hazard and strengthen their risk awareness.
Fourth, the core issue lies in the salary system
However, we must also see that the recourse mechanism treats the symptoms rather than the root cause. The real root cause is that the bank's compensation system is flawed, with an over-reliance on performance, leading employees to focus on short-term benefits and ignore long-term risks.
Some bank employees only have a monthly salary of 5,000-6,000 yuan, but the year-end bonus can reach hundreds of thousands or even hundreds of thousands. Such a compensation structure will inevitably lead to employees placing more emphasis on short-term performance and risking performance targets to meet performance targets. Even with recourse in place, employees are still motivated to achieve immediate performance targets through various means, as they need to earn more from performance because the base salary is too low.
Therefore, in order to fundamentally solve the problem, it is necessary to start by adjusting the bank's salary system, appropriately raising the basic salary of employees, reducing the proportion of performance-based compensation, and establishing a more stable and predictable salary system, so that employees pay more attention to long-term development rather than short-term interests.
Closing Remarks:
In summary, China Merchants Bank's recovery of employee performance-based compensation reflects the risk of over-reliance on performance in the banking industry, but it requires a fundamental review and improvement of the existing compensation mechanism. Otherwise, it will be difficult to fundamentally solve the problem by relying solely on recourse and other means to treat the symptoms rather than the root cause. It is hoped that the banking industry can take this opportunity to establish a more reasonable and sustainable remuneration system to ensure the steady development of the banking industry.