The image of the banker, portrayed here by this protestor, has taken a battering
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By Kabir Chibber
Business reporter, BBC News
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Gordon Brown has become the latest figure to come out against the culture of huge bonuses at banks. The prime minister said profitability and pay should be more closely linked to prevent the kind of bank collapses that almost claimed the biggest banks in the UK and US last year. Crucially, he also said that was an issue that needs to be discussed internationally. France has been one of the most vigorous in clamping down on bankers' pay, and the issue of compensation at financial institutions will be at the table when the Group of 20 richest countries meets in Pittsburgh later this month. In April, the G20 promised to pass "tough new principles on pay and compensation". So far, there has been much chirping that something needs to be done, but little agreement on what form that should take. Every nation seems to be taking a different approach. New rules Like Mr Brown, Chancellor Alistair Darling has come out against "excessive risk-taking through bonus payments," but has rejected calls to set a limit on pay packets.
"I think that pay agreements ought to be reached by employers and employees meeting together," he said, a view echoed by the Conservatives and many in the City. So far, in the UK, the most concrete actions have come from the regulator the Financial Services Authority (FSA). From January, bonuses at banks will not be guaranteed for more than a year and senior employees should have their bonuses spread over three years under a new code implemented by the FSA. But the fact that Mr Brown and Mr Darling continue to talk about bonuses shows that these new rules have failed to convince most critics of the financial services industry. In the US, there has been a similar level of anger. Public backlash There was much outrage earlier this year when AIG paid out $165m (£102m) in bonuses to bankers, after the US had spent $170bn on rescuing the US insurance giant to keep it from bankruptcy.
Kenneth Feinberg, the US "pay tsar," has yet to establish a clear line on bonuses
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This led to a bill by the US House of Representatives to impose a 90% tax on bonuses awarded by companies bailed out by the US government. A populist measure, it was never passed in to law as the anger faded over time. However, it led to President Barack Obama appointing a so-called "pay tsar," Kenneth Feinberg, who has the power to review the pay deal of any employee at companies that received two or more US bailouts, including Citigroup and Bank of America (BoA). The US House has also recently voted in favour of laws to prevent banks paying bonuses that encourage excessive risk-taking, but it remains to be seen if that will pass into law. Yet despite these efforts, guaranteed bonuses - including over $100m promised to a top Citigroup trader - have begun to return to the industry. Reports have suggested BoA is looking to pay back its bailout so it can avoid scrutiny over its compensation. Mr Feinberg has so far been reluctant to come out publicly against bonuses, preferring to ask the banks that were bailed out to review their policies. The question for politicians in the US and UK seems to be: how you regulate banker pay without damaging the standing of London and New York as global financial capitals? Anglo-Saxon problem? So far, the French have been the most vociferous and the most active in addressing bankers' bonuses. "What we need to collectively eradicate is this rat race - the race for bonuses," Christine Lagarde, France's finance minister, has said. France last week approved a new system of performance-related pay, with penalties for those who lost money as well as rewards for success. President Nicolas Sarkozy, who pushed the banks to adopt those measures, said he would continue to press for tougher controls on bankers' bonuses at the forthcoming G20 summit in Pittsburgh. But Mr Brown has rejected (in polite terms) much of Mr Sarkozy's substantive proposals to regulate compensation. In a sense, France's success on this issue will come as a result of whether it can persuade others to adopt its ideas, given its relatively small banking sector. The issue of bonuses really remains a headache for the "Anglo-Saxon" world to deal with. Despite the strongly-worded communiqué in April, the G20 has done little so far about banker bonuses. With so many different views among the some of the loudest voices in the group, there are few signs that they will bridge their differences in the few weeks left before the summit.
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What we need to collectively eradicate is this rat race - the race for bonuses
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