The chorus to toughen up bonus rules is getting louder and with more Barclays staff joining Millionaires’ Row today while profits fall does not help the industry’s lobbying effort.
Sure, the Brussels bonus cap is half-baked. But the City’s response has been by no means perfect either.
Introducing monthly allowances to supplement basic pay in lieu of larger bonus payments has killed two birds with stone.
It weakens the correlation between pay and performance and paints bankers as rule dodgers — not the most appealing look when they try to outdo each other in new-found community spiritedness. Treasury Select Committee’s Andrew Tyrie and former chancellor, Lord Lawson, favour longer-term deferrals than the three to five years in evidence today. But it is the quantum, not the time delay, which remains most irksome for chief executive, Antony Jenkins.
Nor does one size fit all. It would be unwieldy to defer the bonuses paid to retail sales staff for anything more than a few years, whereas executives and investment bankers could learn from their private equity cousins who routinely wait a decade for their “carry” — and then only cash out after investors have received their cut.
The key to getting the balance right rests with the hitherto supine shareholders, not regulators. They have the most invested in the banks’ prosperity.
For pay to outrank dividends in some cases shows that a sufficient rebalancing has yet to take effect.
