BONUSES
Bankers’ bonuses - PwC reaction
PricewaterhouseCoopers has welcomed the G20 communiqué on banker’s bonuses, but it warned that achieving change through legislation "runs the risk of unintended consequences".
Jon Terry, reward partner, PwC, said: “The G20 has largely avoided eye-catching new initiatives on compensation but has focused instead on the much needed requirement for consistent global implementation of the principles set out at their meeting in April. If achieved, we believe this would bring about the changes needed both to restore trust in remuneration processes and to support the future resilience of financial services.”
He added: “The G20 communiqué and the Financial Stability Board’s implementation standards clarify existing thinking. The new aspects – such as limiting compensation as a percentage of revenues for firms short of capital – will take a while to work through in detail, but this should not distract from the core task of getting existing principles implemented consistently. The detail of course will be hugely important.”
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But Terry warned that banks risk losing talent to less regulated markets if their previous regulation requires them to adopt compensation practices that are less favourable than those enforced by regulators elsewhere. “A level regulatory playing field therefore remains critical,” he said.
New legislation
Chancellor Alistair Darling has confirmed that new legislation will be enacted to ensure remuneration in the financial services sector is linked to long-term performance.
Terry said: "We await developments on the UK government's announcement of their intention to bring forward new legislation. In general we would prefer to see such changes implemented via the regulatory framework of the Financial Services Authority or through existing governance frameworks such as the Combined Code. The Walker Review, which is addressing these issues, should be allowed to run its course and the temptation to introduce prescriptive legislation should be resisted."
Want to know more?
The G20 reforms (in PDF format) are available on the Pittsburgh Summit web site at www.pittsburghsummit.gov/documents/organization/129870.pdf.
PricewaterhouseCoopers provides “industry-focused assurance, tax, and advisory services to build public trust and enhance value for its clients and their stakeholders”. For more details visit www.pwc.co.uk.
--> E-reward has published a detailed analysis of the regulatory developments for pay in financial services firms. For more details email paul@e-reward.co.uk. Or visit www.e-reward.co.uk/reports.asp?report=73.