Monday, 18 June 2012

The language of unintended consequences

Interesting comment here from a remuneration consultant in response to the idea of a max 1:1 salary to bonus ratio in banks:
“If they do put caps in, this could have disastrous unintended consequences. It could result in significant increases in fixed pay,” said Jon Terry, global head of human resources consulting at PwC. “It substantially affects the flexibility of the business.”

This is a commonly heard argument, and a popular spin on unintended consequences. It's also interesting from a linguistic point a view. One of the useful things in discourse analysis is the concept of foregrounding/backgrounding in the construction of speech/text etc. What is made explicit and what is not (intentionally or otherwise)? In the excerpt above, the threat of unintended consequences is invoked and action A (bonus cap) could lead to result B (increases in fixed pay). The implication is that A causes B. Though the phrase "could result in" is sufficiently vague to not quite claim this, the fact that the result is "disastrous" does imply an an unthinking effect from the initial action.

But A doesn't cause B. There is an agent missing (backgrounded if you like) in the description that plays a role in this process - the bank employing the bankers. Whilst the langauge implies that result B is suffered by banks, it is actually the banks themselves that will decide whether to significantly increase fixed pay or not. Especially if the outcome is "disastrous", why would banks make it happen? They could simply not increase fixed pay significantly, surely? In reality then A (the bonus cap) affects C (the banks) which can decide whether or not to make B (increases in fixed pay) happen. In addition the "consequence" (result B - increase in fixed pay) cannot really be said to be "unintended". Presumably if the bank raises fixed pay the intention is to raise fixed pay, and the consequence is raised fixed pay. (In addition, the EU's intention is to cap bonuses and if bonuses are capped the consequence is capped bonuses).

PS. In the last bit of the comment the argument is made that a cap on bonuses would affect the 'flexibility' of banks. Presumably this is a reference to the claim that high variable enables banks to manage staff costs during difficult condititions. But there is no suggestion that bonuses would be banned, only that the can only equal base pay. That means that, just through bonus policy, in a tough year a bank could cut its maximum potential staff costs by 50% (It could, of course, also consider cutting base pay and/or numbers of higher earners). It would be interesting to see what has happened to bankers' bonuses as a percentage of salary for the last few years when the economy has nearly fallen over. Presumably they must be zero or close to, right? I mean this type of period must be when they really need "flexibility".  

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