From an insider
I'm in RBS at the mo.
> Corprorate penalties are useless, they're just passed on to customers and employees.
Well, yes and no. You could of course pass on costs to customers, but it's not a great idea, because you need to keep competing with the other guys who haven't been fined, and the last thing you need after paying a big fine is for your customers to take their money elsewhere. Similar with employees: to avoid the next fine, you need good staff doing things well, and cutting salaries causes them to go to other banks (and the labour market in banking is extremely liquid). Not saying that it doesn't happen -- it seemed pretty clear that Natwest tried passing on their costs to their customers in the wake of Robert Maxwell screwing them over -- but that was very bad for Natwest's reputation, and I think most of the industry have learnt from such mistakes, even if it took them a while. Certainly RBS have decided that their biggest mistake in the run-up to 2008 was a lack of good-quality customer service, and so their big company-wide target at the moment is to make customers want to stay. Passing on the fine to customers would be counterproductive.
In general, such a fine will be passed on to shareholders. In the case of RBS, that's the taxpayer. (I don't really see the logic in the state fining the taxpayer myself.) From RBS's point of view, what that will equate to is a delay in reaching the point where they can buy themselves back from the state, which is something they really want to do. That's the real punishment.
> If the senior management (and their puppets on the remuneration committee) think that the company's success is due to their individual actions and therefore they deserve individual megabonuses
Sorry, which is it? That the costs of fines are being passed on to employees or that employees are being given huge bonuses? You do get that they're opposites, right?
> what does logic tell you should happen when the same people's individual actions cause megadisasters?
No argument from me (I'm a great believer in paying the price of failure, and I was against the bailouts), but we know what caused this particular megadisaster, and it wasn't a senior manager; as mentioned in the article, it was an inexperienced member of IT staff screwing up a batch job. We've all been there -- or I have, anyway -- although not always with such disastrous consequences. I'm not sure how I feel about individual members of staff being fined for mistakes. At the least, we need to recognise that what we're talking about here is making people homeless. Who'd apply for a job with that sort of risk attached?