In the last ten years, the average FTSE 100 chief executive’s pay packet pole-vaulted up by 295%. Contrast that with the mere 50% increase in earnings of average citizen in the UK (according to Manifest, which advises investors on corporate governance). The banking industry hasn’t exactly held bank on paying itself big bucks in bad times and overhauling the way bankers’ pay works is of pressing urgency to an industry with a reputation as storm-tossed as its budgets.
On this side of the Pond, we found it a bit strange that, in the US, CEO and CFO pay at more than 100 banks on the TARP program did not decline in line with profits. In the City, there’s much dissatisfaction at guaranteed bonuses being waved at some lucky so-and-so’s by banks still owing millions to the government. Muttering taxpayers are saying “But it’s our darned dosh they’re throwing at these guys, not theirs.” The resentment among those who’ve lost jobs, bonuses and taken a big hit on their pension pots is running feverishly high.
It’s no wonder then that, this past March, the FSA, in an effort to align executive compensation with risk for bank boards and management, recommended that two-thirds of bonuses should be deferred, and that individual compensation awards should also reflect the overall performance of the business, rather than that person, team or division. More puzzling, however, is the Financial Services Authority’s recent pull back from the sterner draft suggestions.