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President Nicolas Sarkozy of France imposed tough curbs on bank bonuses. He ruled that brokers and traders defer their bonuses over three years and be paid only on performance.
Later this month, the G20 nations meet in Pittsburgh. Sarkozy wants his proposal for bank bonuses on the agenda. France wants three options debated:
- A maximum ratio of a bank's gross operating income to be earmarked for variable pay.
- A special tax on the financial sector whose revenues could be channeled into national schemes for insuring retail bank deposits.
- A straightforward limit to bonuses in terms of value.
Last week Mr. Sarkozy spoke of the "scandal of bonuses" when he was laying out the curbs for French banks. He said: "We're looking for G20 declarations that are as strong on bonuses as they were on tax havens in April."
As you can guess, there is strong opposition from the U.S. and the UK. Gordon Brown of Britain said that: "Imposing a cap on bonuses would be very difficult in an international environment. ... There is also a legitimate debate to have on what the proper share of bonuses and indeed the type of remuneration is as a proportion of the income and profits of a company."
France favors the first option, where a ratio of a bank's operating income to be earmarked for variable pay suggesting it be 20-30%.
You can bet that the U.S. and UK guns will be loaded and at the ready when the meeting gets underway.
Although, in another sense, this could be a way to wipe away the bonus issue from the spotlight and let bankers continue along their merry way, doing business as usual.
Do you believe that any meaningful change will occur at the G20 meeting?
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