Bankers warn of a talent exodus if rewards are withheld. But happiness for most employees is driven by factors such as work-life balance and career potential

Greedy bankers have come under heavy fire since the credit crunch and banking crisis. Commentators have hit out at their "quick-buck" mentality in (un)securitised mortgages and other dodgy financial products. But their excessive bonuses have drawn the most flak.

Regardless of the accuracy of such claims, many observers resent their hard-earned taxes having been used to bail out businesses that are now busy paying huge amounts to staff. Even those banks that were forced to borrow from the Middle East to stay afloat are handing out big bonuses again.

The media, the public, government and the like are all aghast at their cheek, but senior executives in the banks claim these payouts are important for attracting and retaining the best talent in a global marketplace.

Last month, RBS boss Stephen Hester admitted to a committee of MPs that while his parents probably thought he was paid too much, the bank he heads up—which is 84 per cent owned by the state—was effectively being held prisoner by the market.

Another spin placed on the same argument is that we should be pleased that the banks—we, as taxpayers, own—are awarding bonuses that ensure the brightest staff stay on board. How else will they recover sufficiently to get off government life support?

There are several points to consider here. First, how many bankers, or those working in the finance sector generally, are truly internationally mobile?

I suspect you would find that this much-touted freedom is a possibility for a few only at the highest levels. Where is the evidence that there is a global market for finance sector talent at all levels?

Second, the underlying assumption is that people working in finance are primarily driven by salary and bonuses. And yet if you look at any of the happiness indices that are published almost monthly, what people earn always appears way down the pecking order, with other factors such as relationships, health and the overall quality of life ranking much higher.

Where money features it does so in the looser sense of financial security rather than a large salary. And when it appears in the top five factors it is almost always below these personal considerations.

Third, when we turn specifically to the workplace and explore what motivates and engages people in their careers, we find that bonuses come out at the bottom of the list. One such ranking is the Mercer table of engagement factors, produced by the benefits consultancy.

In this table, the order goes: respect, type of work, work-life balance, providing a good service to customers, base pay, the people you work with, benefits, longer-term career potential, learning and development, flexible working, promotion opportunities and, last of all, variable pay and bonus. The table is broken down by country, and in all large economies except Japan bonuses come bottom. In the UK, such payouts are ranked lower as a motivator for engagement than in any other country.

Either this obsession with the bonus culture is unique to the banking sector, as distinct from other areas of the UK economy, or the retention and attraction argument is merely self-justification for a City practice that has gone on too long and is so deeply engrained in finance that even our economic circumstances cannot penetrate it. I can't believe the first is true, which points to a serious problem for the banks.

The reality of working life is that although people want a sense of job and financial security, they are less motivated by base pay and bonuses than by social and psychological factors, such as being respected and valued at work, having a reasonable work-life balance, doing an interesting job and feeling they are making a contribution to their customers and society. These are the real drivers, not the enhanced bonuses to buy another exclusive overseas holiday, a gas-guzzling 4x4 or a large flat-screen television.

As Henry David Thoreau wrote in 1853: "How prompt we are to satisfy the hunger and thirst of our bodies; how slow to satisfy the hunger and thirst of our souls."

Cary Cooper CBE is co-author of Employee Morale (Palgrave Macmillan, £25)