During the banking crisis, The Royal Bank of Scotland received billions of pounds of public money to stay afloat, such that around 70% of the bank is now owned by the British people.  However, after lots of job cuts, the bank are now saying that they will give around 1.5bn pounds in bonuses to key staff.  Quite a few people think that this is outrageous, including the singer Billy Bragg (who is saying that he will not pay his taxes until the the chancellor of the exchequer curbs the payments), and politician John Prescott (who has started an online petition).

The other day I had an idea for an interesting psychological project.  What would happen if thousands of RBS customers pledge to withdraw their money from the bank on a certain day, unless the bonuses are capped? If enough people were involved, it would probably cause a run on the bank, and so it would be a foolish threat to ignore.  So, here are my questions…
– what do you think of the idea?
– from a psychological perspective, do you think lots of people would join in?
– from a legal perspective, would the scheme break the law?

96 comments

  1. I think it would be much easier now in the day of Facebook and Twitter to do something like this that it would have been years ago.

    I think a lot of people would LIKE to join in and a lot would SAY they were going to but when push comes to shove I think most would not. Who knows though?

    It seems like a great way for people to protest this action and is certainly more effective than threatening to withhold paying your taxes (which is illegal, BTW)

    I’m not a lawyer, and I don’t play one on TV, but I don’t think that encouraging people to withdraw their money from a bank on the same day would be illegal (unless the run on the banks caused riots or something) and it would be much more effective if enough people announced their intentions in advance and insisted that they receive their money in cash (preferably suitcases of small bills!)

    If you are serious about this, do three things:
    1- get lots and lots (tens of thousands) of the common people involved via Twitter and Facebook. The power of viral media in grass-roots movements is staggering! Kids can organize a flash mob in hours and get 100 people to come.
    2- get some high-profile celebrities on your side and get them to agree to do their withdrawals in public. How about the afore-mentioned Billy Bragg and John Prescott… Does, for instance, Sir Richard Branson bank at RBS by any chance? You probably couldn’t find a more high profile celebrity and he seems to support lots of grass roots causes. Could he be convinced to support your cause? Can you get a list of other high-profile customers and discretely contact them?
    3- Get the media on your side. Have your facts at the ready. Don’t go off half-cocked or you will be branded a nutter who should be on a soapbox in Hyde Park.

    The real selling point is not to ‘bring down a naughty bank’ (that’s the nutter position) but to draw attention to the fact that after mis-manageing money and having to go, cap in hand, to the people for funds to stay open they now have the gall to pay bonuses to the very people who created the situation in the first place.

    The bank’s argument will be: “We have to pay bonuses to the top financial minds or they will leave for the competition and we won’t have their skills and training and the bank will be further behind than before.”

    This is tantamount to me asking my parents for a loan for food for my kids and rent to keep a roof over their head and then taking some of the money and going on a vacation because it’s easier to deal with financial stress if you are relaxed.

    I think my parents would be justifiably upset at that and would withdraw any assistance in the future.

    Best of luck

    1. “The bank’s argument will be: ‘We have to pay bonuses to the top financial minds or they will leave for the competition and we won’t have their skills and training and the bank will be further behind than before.'”

      While this may be the original reason for the bonuses, it is my understanding that these banks were contractually obligated to pay these bonuses before any crises hit. I’m sure they’d rather not pay them now, but I believe they are required to by law.

      Does someone else know more about this?

  2. On reading the Billy Bragg and John Prescott links I suggest joining forces with both of them and combining groups. Each of them claim to already have thousands already signed up. You’r addition to the mix is the suggestion to withdraw money on the same day as a publicity stunt.

    Go for it

  3. Concerning bonuses: I simply cannot comprehend that the only way to get competent managers is by paying them exorbitantly huge amounts of money. In that case their number one priority is no longer the company and the people that work for the company and the customers, but it is their own bank account.

    In other words, IMHO managers you can only get with big sums of money are focused on completely the wrong priorities.

  4. If I thought that a large number of people were going to do that, I’d withdraw all of my money the day before the official protest. In fact, I figure that a lot of people would think the same thing, so I’d actually withdraw my money the day before that. In fact, …

  5. If you get a sizeable number of people to signup for the withdrawal, and you get good publicity for it, the anticipation of the event itself will drag the share price down. That should be threat enough?

  6. Yes, we have had the same thing happen here in the US and it really pissed me off. I felt that there were many newly unemployed that would be more than willing to take the CEO position for less pay and no bonus…and even if they had to do some on the job training how much worse could they be? They weren’t the one to get the banks in to such a mess. What makes some one think they could do such a bad job and then get so much money!? They could not live on less money? What do they think the rest of us have been having to do? And I don’t mean doing without the extras…..no some of the basics…..their jobs and homes…..sorry….. a little touchy on that subject…….. :}

  7. I think this is an irresponsible idea. I agree that it seems immoral that the bank should pay huge bonuses, but this threat will cause more harm and won’t stop the payments. The bank is right that it has to pay the bonuses to be competitive, and if Britian becomes a country which restricts banking business the big banks will do business elsewhere. London is currently the financial capital of the world, but actions like this and threats from the government are going to change that. Our economy, and so all of us, will suffer if the big banks leave.

    1. I do not support a run on the bank but one should never reward bad behavior or failing job performance with BONUSES…..these CEO and like positions CAN be replaced……in the US we have people standing in line looking for jobs and could perform at least if not better then the crooks that are ripping us off and laughing all the way to their out of the country banks……… you should never let them rule you by fear……ie give us what we want or will go else where…….YEAH! go to work for our competitor and ruin their business!!

    2. Oh just to make clear…..I do not mean for the banks to close and move……. no not the bank but the persons that are demanding the bonuses……and I am speaking about mine here in the US….. as we have been there and done that and I’m still pissed…..only someone living in that area should speak and make those decisions.

  8. A run on a bank is never a good idea. Although it sounds nice that the bank will go bankrupt (again), you have to consider all the investments that the bank has. If the bank goes down, people whose mortgages are through that bank will suffer. Same with all the businesses that are supported by the loans from that bank. It’s just not wise.

  9. Why would you cut your nose off to spite your face? The public own the bank. Bankrupting your own company to prove a point is silly. Plus the people who didn’t withdraw their savings would lose them.

    It is also important to ascertain what percentage of direct revenue the bonuses are related to.

  10. Your government would bail out a big bank they owned for 70%. The richer costumers of RBS know that too. It will be hard to persuade them to join in a run in here, however good the cause is. This is an important difference with the DSB case.

    The basic principles of economics tell us that the bankers earn too much, because there are too few of them. Maybe there is a psychological reason for that: rich patrons need to have faith in their competence, something they do not hand out to just anybody.

  11. I’m going to go out on a limb and also advise against orchestrating a run on a major bank for chuckles or in order to raise your profile or just to prove you can.

    It would either (a) cost us another big chunk of money to save RBS which might be better used by, say, the NHS, or (b) cause financial hardship to a large number of people who’d lose their savings or have their debts called in.

    It would not, though, overthrow capitalism. For that you’ll need something better than a publicity stunt on Facebook.

  12. Sounds fun until you take into account that the bank doesn’t hold all the money people have entrusted to it. It has it invested in businesses and other projects, loaned out to other customers, etc. There is no way they could suddenly afford to return it at short notice.

    Being faced with its customers wanting all their money back would not only result in the bank collapsing, but also in a lot of customers not getting their money.

    Fun idea that would end with a harsh practical lesson in economic reality.

  13. I doubt you’d be able to orchestrate enough withdrawals to tank RBS again. It simply doesn’t follow that the people with significant amounts deposited in RBS would participate. A latitudinal campaign of tens of thousands of regular folk withdrawing would do one thing: temporarily bring share prices down to be scooped up by private investors taking advantage of the opportunity. It’s a fun idea, but in the end you’ll simply help the fat cats get fatter.

  14. I feel sorry for people who have to rely on bonuses. Their salaries are just enough to survive on and the ‘bonus’ is their actual pay. Without it, taking into account the long days they work, they’re not paid more than ten pounds an hour. The ‘bonus’ is what they work for and it’s the bank’s way of controlling their workforce.
    Would you like our economy to be in the hands of people who are payed less than the average plumber?

    1. Hi Chris I understand those type of bonuses and it is hard on them when they get thrown into the mix with the ones at the top that are already getting million dollar salaries….. that is what we saw here in the US also, and for me that was even worse since those in mid-management were the ones doing all the work. So for me paying bonuses to the top and CEO with millions in pay already was insult to injury……. I guess I shall be quiet now since this isn’t about my banks now……lol…..but felt soooo good to get that said……..hufff…..pufff…..step… shove…. OK off my soap box now……. :}

  15. I’m so up for this. Let’s do it! I have an account owned by the RBS group, and would gladly empty it to teach them a lesson. Especially after they’ve recently charged me to high noon.

  16. Like Chris has said, for some staff it’s just plain part of the pay. I used to work for a bank, a pretty basic job, and it was very, very low-paid. We got one (not exactly huge) bonus a year, and that was really vital to keep our heads above water.
    You’re not threatening big, rich, faceless CEOs when you suggest things like this. You’re threatening the jobs and livelihood of thousands of ordinary people who have already seen their mates laid off, and faced paycuts. Every time some regular bank employee sees something like this suggested by some big personality somewhere, it’s added stress, it’s an added threat to their already precarious jobs, and it seems like one more person who is dehumanising them because of their pretty normal, boring office jobs. If you threaten a bank like this, do you honestly think it’s the CEOs who would suffer? Those guys could retire and live on their savings for the rest of their lives. You’re threatening the future of a bunch of people who budget carefuly to pay the rent, get their shopping from Tescos and have enough left over to go down the pub on Friday for a pint.
    It’s really unfair. If I had seen this whenI was still in a bank, I’d have felt sick. Please spare a thought for the people you are threatening when you come up with ideas like this.

    1. Hello you have a very good point about those in the bank /customer contact point. As upset as this issue has gotten me you wouldn’t think that my oldest son works for a bank….lol….and just last week got a raise and promotion….only because the has been the top producer for his district of sales bank products/accounts. Now as his mom I still don’t think he gets paid enough….. nor any of the others that come face to face with the public…..we have had an increase in bank robberies…. and not long ago he was held hostage at gun point for an hour until they were able to get the money he wanted and as he left and the dye pack went off just out side my son was the only one to see his face and he was told by the robber he would kill him if he ID him to the police….. he is still out there but the police know who he is……. so no those employees do not get paid enough…… but I still say on bonus to the top folks….. just fire them!

  17. This is one of those things where you really need to think how this would affect the bank and its customers. People are making very good points so far, so you would need to look at all the aspects and the consequences of the actions. When I first read this, I was all for it, but on further reading I think I’m against it. Somebody made the good point of bringing down our own bank would be silly.

    Try and contact Dan Ariely and see what he says about this 😀

  18. The government controls the bank. It has the power to determine the bonus scheme. Why doesn’t it use it?

    When the government took over RBS and said that it would not use its shareholding to direct the management in any way, in effect it was saying to the management “go on, help yourselves”. And they have.

    When you control a company, you want the management of that company to behave in your interest. This is a much studied problem in economics called principal-agent problem. It is similar to other situations where you get someone to do something for you that you don’t know everything about, like employing someone to mend your car. In practice, it is difficult to get an agent to behave entirely in your interest, to the extent that they have informational advantages they can always exploit that to some degree. But making no control whatsoever of the person acting on your behalf is an invitation to be ripped off. That is what the government has done in relation to RBS.

  19. For various reasons, I am unimpressed with RBS. If I were starting fresh here, I’d put my money in a different bank – one, ideally, which had a track record of embodying better principles.

    However, I have a mortgage with them right now, and the personal cost of ceasing business with them would outweigh the benefit.

    Someone above mentioned the public ownership of the bank. What leverage does this give us, the public, in deciding bank policy? Can we lobby RBS through our government?

  20. Re: Tim, I’ve wondered that. The news and that keeps telling us ‘we own’ the bank. But we don’t seem to get a say in what happens! If we do indeed own we should have a vote or something like that. Time and time again we hear that the public own it, but nothing ever comes of it. If you own something, it’s yours and you decide what happens to it. Not someone else (without consulting you first at least)

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  22. This post asks three questions:
    -what do you think of the idea?
    Terrible – the objective seems to be to punish a small group of people who have a legal entitlement to their bonus. If the scheme were to succeed probably a second bailout would be required as the bank is still too “big to fail”. Where this would leave the bonus receivers is unclear, but a lot of pain would be felt by all the other stakeholders – employees, customers, suppliers and owners (that is you and me). It seems a bad trade-off – although it has been shown that people will accept some pain if the perpetrator of a wrong is seen to be punished. I have not seen examples where the pain is inflicted on a third party – here is an opportunity for some research.

    – from a psychological perspective, do you think lots of people would join in?
    Yes, as the headline is “punish the fat cats” – all the other losers are hidden from view. This is very beneficial for newspapers (ahem – and blogs) and of course politicians as it gets attention and something can be “seen to be done”. It rather draws a parallel with tyranny of the majority – or in this case a lynch mob.
    Now WHY would people drawn into this? I’m looking forward to an answer in future posts (or books). I feel that being part of a group, participation in direct action, punishment of “villains” who seem to have escaped natural justice, power of mass communication and rushing to a simplistic conclusions are all part of it. Hey, a decent analysis would be interesting…book anyone?

    – from a legal perspective, would the scheme break the law?
    No idea.

  23. this is a mad scheme, although I agree that there needs to be a cap on the bonuses given to these top dogs. What is not right is that the people who work every day for the bank should be punished. how many people who would be receiving these bonuses would lose their jobs? Probably none. It will be the everyday joes who work in the bank that will lose out.

  24. I neglected one thing that I don’t think has been covered yet, unless I missed it: here in the US, some cases of mob-anger over corporate bonuses involved bonuses that were in fact contractually obligated. The idea of contractual bonuses confuses the hell out of me, but…there it is.

  25. A run on the bank would be bad for everyone. Since such an event could come about as a result of public panic, your proposal in a public forum is grossly irresponsible.

  26. More instability in the banking sector is the last thing we need right now. Our hopes should be that RBS returns itself to a profitable state with the appropriate lessons learnt, and delivers a return on the taxpayers investment in it. The guys who took the company down are long gone. You would be punishing those attempting to rebuild it, as well as the wider UK economy. For what? A misplaced feeling of moral righteouness?

  27. Without reading the other comments (which might sway my opinion) I think
    -The idea sounds like one of those “looks good on paper” ideas. It seems simple and obvious, but I suspect unexpected snags and problems would make it harder to execute.

    -From a psychological perspective, I see a lot of people emailing their friends and coworkers to participate. It reminds me of those emails encouraging people to boycott a product on a specified day to “show them that WE can make an impact.” (Nevermind that when the day arrives, no earth shattering impact is reported.) I think these email chains might function as a psychological pat on the back. Sort of a reassurance that, as powerless as we may feel, we, theoretically, could make an impact if we truly wanted to.
    Would the scheme break the law? I suspect a talented lawyer could determine it would.

  28. I doubt retail sight deposits (the kind that could be withdrawn) represent a sizeable portion of RBS’s funding. Even in the evnt of a coordinated withdrawl the would presumably be replaced by a line from the central bank or deposits from the interbank market; ie the money withdrawn being deposited in other UK institutions which would then have surplus cash to lend to an RBS seeking loans.

    The net result would be a slightly less profitable/stable RBS but would not bring it down immediately. I’m more confident that a prolonged boycott of RBS (in all it’s guises) and consumer pressure on other businesses to switch away from doing business with them in (for instance) payment services would be effective in the long run (several years) a la Barclays and South Africa.

    I’m really not sure that we should single out RBS as the worst offender in this matter is Barclays, by miles, which continues to pretend it didn’t need any taxpayer help and run a repulsive investment banking business, (an order of magnitude larger than RBS’s) effectively backstopped by the UK taxpayer, responsible for some of the worst excesses in structured credit.

  29. A touch naive, perhaps, and somewhat dangerous and irresponsible. Let’s say it goes ahead, there’s a run on the bank, and it collapses, who suffers?

    Everyone whose pension fund is invested in RBS.
    All those customers that *didn’t* withdraw their cash.
    All those customers with loans that the administrator will surely call in.
    All the ordinary joes that have an already trashed shareholding in RBS.
    All the folk that work at head office and in branches, and make just an ordinary wage.

    …and a tiny percentage of highly paid, bonused staff who will simply up sticks and find a new job somewhere else PDQ.

    Need to think this one through a bit more perhaps.

  30. I think the banks should be held accountable and bonuses in the wake of poor performance seem to be contradiction in terms.

    I wonder about people joining in. Would I join in to help bring down a bank (even temporarily) where my own money was on deposit? Hmmm…

    I’m not certain about the law. (I’m in the US) I imagine creating fear about a bank’s performance would be illegal, kind of like yelling ‘fire’ in the theater. Conspiring to bring financial harm to a corporation seems a little shaky as well. It seems different than a simple boycott, yet I’m hard pressed to define the difference. I worry about harming other innocent customers but if their deposits are insured than they are safe.

    The legality is an interesting question however I think in practice, they’d hang you…

  31. It is a double whammy folks. Tax payers money is sitting in RBS and if we fool around as suggested it will only back fire on the Tax payers. RBS knows this only too well. Also this affects every tax payer so I don’t think something like this should only be made available to collective few.

  32. Have only skimmed previous comments, but they seem to be along the lines of ‘no, because as taxpayers we own it’. Umm, how about ‘they have your money’?

    Say I have 10 pounds of of your money. You stand a fair chance of getting your money back (according to the UK.gov guarantee). Should you (a) cause panic and try to get cause your creditor to go bankrupt due to short term cash-flow problems (causing loss of your money) or (b) gently exercise economic free will in an orderly and sustainable manner.

    The biggest failure of economics (aside from assuming it can be modelled deterministically) is to assume that people are greedy and rational, rather than impressionable. Panic rules, and people who can calmly deal with get paid for that skill.

  33. Self-fulfilling prophecy…

    If the people think in an incomming bankruptcy, the panic will generate this bankruptcy

  34. What about the tens of thousands of regular workers at RBS who are just happy to still have their jobs, you’d be punishing all these people to teach a few hundred a lesson – hardly seems fair? (& yes I am a one of the tens of thousands of regular employees who don’t get stupid bonuses & is just trying to pay the mortgage and feed the family). Agreed something has to be done but bring the Bank down in it entirely will do more harm than good.

    1. Sorry – last part should read: (Yes I am one of the tens of thousands of regular employees who don’t get paid stupid bonuses & is just trying to pay the mortgage and feed the family). Agreed something has to be done but bringing the Bank down entirely will do more harm than good.

  35. I don’t like the minority of RBS employees getting these ridiculous bonuses either. However, we all have a stake in the recovery and success of this bank. Shareholders, people with savings/pensions that have invested in the bank, employees, and now all taxpayers have a vested interest in the future of this bank. To risk it’s stability also risks the stability of the banking sector as a whole and a return to the uncertain days of October 2008, not to mention the potential job losses of thousands people.

    It’s unbelievable that the complaint is made about the large government investment in the bank and yet at the same time action is advocated that will jeopardise that investment! If all goes well, the government will get its money back – maybe – not straight away – but eventually – that’s just the way it is.

    This suggestion is not an “interesting psychological project”, it’s irresponsible, childish and idiotic. If you want to flex your Twitter/Facebook muscles and have your own “Rage Against the Machine” moment, choose something harmless and inconsequential.

  36. Hi,

    Like many people here we are outraged not just by bonuses, but by the minority in the banking sector who consistently exploit the current system for their benefit. They virtually see it as a fundamental human right to have a massive pay package that is not only completely devoid of any link to their actual performance, but also to the wages of much more important people in society, like nurses, doctors, firemen and airtraffic controllers.

    That’s why some of us have got together to form the Change your bank campaign (http://www.changeyourbank.info). We’re writing to our banks, asking them to change. If they don’t, then we’re going to move our money to a company that we feel is better suited.

    We want more and more people to join us so that banks start to listen to consumer power. It’s our money in the banks – either our salaries through retail banking or our pensions through more riskier markets – so we need to tell the banks to stop. And we need to make them listen.

    Join us and help change your bank today.

  37. There’s a fundamental problem here. If everyone withdraws on a certain day, the bank may indeed fold, and people may have trouble getting their money back.
    Knowing this, the rational thing to do is to make sure you withdraw all your money the day *before* everyone else does, thus making sure your money is safe from the inevitable difficulties the bank will face.
    Of course, everyone can see that this is the case, so everyone will withdraw their money the day before they’re supposed to. Knowing that everyone else is going to do this, the rational thing to do is to withdraw the money the day before the day before you’re supposed to.
    However, everyone can see that this is the case so… quick – get to the bank! You’ve got to get your money out before Richard tries to put his plan into action and everyone realises the inevitable chain of logic!

  38. I am not a Brit, but my feelings about these banks passing on enormous amounts of money as bonuses are the same. I believe the idea is great and people should ask for their money back. Banks survive on the fact that all the people are not going to ask for all their money at the same time. On the other hand, I do believe that if something like this happens to RBS, Dr Wiseman will have to use all his wisdom to find way out of legal net. He can easily be singled out from public on the grounds that he instigated a scam against RBS; while the ‘public’ may not be held responsible. So I believe. Also, a good majority of people after withdrawing their money may tell the truth if asked whether they did so on Professors instigation. And as per the experiments conducted by so many psychologists result in a major public opinion building that the act was not correct. I would be interested to know what Dr Wiseman has to say on this question as a person and as a psychologist.

  39. Nothing related to the question; but has anyone noticed a small, teeny-weeny smiley right the bottom of this page….I wonder if that is the psychologists smirk !!!!!

  40. should deffinitely all start shorting shares if we are planning on going forward with this. I don’t believe there is a law against outsider trading! it’s collusion either way, might as well make money off of it too!

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