This question causes heated discussion among those who do not understand the corporate compensation and bonus system. It heated up even more with the recent announcement that the Royal Bank of Scotland, having been bailed out in 2008 by the UK gubmnt and despite still losing boatloads of money, paid bonuses of £576 million to its staff. [from various sources, including this and this]
The bonus pot - down 15% on 2012 - includes a £237 million payout shared among its investment bankers.
The taxpayer-backed lender, which is just over 80% owned by the Government, saw losses widen significantly from £5.3 billion in 2012 after taking a £3.8 billion provision for a string of scandal-related charges and a £4.8 billion hit for the creation of an internal "bad bank".
Ordinarily, one might think a bonus is a reward for excellent performance, and it just doesn't seem right to reward people who are losing money hand-over-fist.
But the evolution of compensation packages has given a very different meaning to bonuses in large corporations.
It is extremely difficult to cut someone's baseline salary when a corporation is performing poorly. It hurts people's sense of self; it is worse than a slap in the face.
As a result, compensation packages in many [most?] large corporations include lower base salaries coupled with flexible bonus packages. When the firm does well, the bonuses are higher; but when the firm does poorly, the bonuses are much lower.
And that is what happened at RBS. The bonus package was smaller than it had been in the past. It was not a case that the employees and executives were being rewarded for poor behaviour. Rather, they had their overall compensation packages cut via smaller bonuses to reflect the reality that the firm had additional losses.