TALK of stopping bankers’ bumper cash bonuses is probably just rhetoric, according to the chief executive of Schroders in Guernsey.
Julian Winser (pictured) said he thought calls from finance ministers around the world for an overhaul of the industry’s pay system would come to nothing.
A union of regulators, the Financial Stability Forum, said the current structure – whereby bankers frequently receive £1m.-plus bonuses based on their performance – needed urgent reform. Mr Winser said he suspected that was an empty gesture.
‘In a free economy, it’s difficult for a government to legislate because people will move to another, unregulated country.
‘This is the sort of noise you would expect to hear coming from a politician at election time in order to satisfy the majority of people who aren’t earning millions.
‘I think the UK Government will urge moderation instead.’
According to the Telegraph the FSF said remuneration should be tied to performance over credit cycles, which last five or more years.
According to New York Magazine, in 2006, Goldman, Sachs and Co. set aside $9.25bn – almost $420,000 per employee – in bonuses.
But due to the hierarchy within the company, that would have meant that while some workers netted dividends totalling thousands of dollars, some of the high-fliers would have bagged six-figure handouts.
Mr Winser said bumper bonuses were traditionally more commonplace within the large investment banks in the City than in Guernsey.
‘We don’t have a huge number of investment bankers in the Channel Islands working in mergers and acquisitions, which is where the big money is.
‘A £20bn company acquiring a £10bn company could command legal fees of up to £20m. or £30m. The size of the sums involved is amazing.
‘It’s not unusual for some of these people to receive bonuses that dwarf their salary. I remember one news story not so long ago about a group of Barclays bankers who spent £35,000 on a corporate lunch. You don’t do that if you’re only getting a £5 bonus.’
The calls to slash bankers’ bonuses come as the economy suffers a downturn from the global credit slump.
Chancellor Alistair Darling has pledged to implement the FSF’s proposals and recently urged banks to ensure money filtered down from top brass to consumers.
It is likely that any change would cause outrage in the industry.
Speaking to the Telegraph, British Bankers’ Association chief executive Angela Knight said remuneration was a matter for shareholders and the industry only and that was where it should stay.
However, the FSF said there was a direct link between sizeable payouts and the incurring of large losses.
‘Compensation arrangements often encourage disproportionate risk-taking with insufficient regard to longer-term risks.’
Article posted on 21st April, 2008 - 2.30pm
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