It is easy to be cynical about bankers’ decisions to waive their bonuses. After all, the tarnished titans of Goldman Sachs, Deutsche Bank, and UBS made enough during the good years not to have to worry too much about forgoing millions for 2008. Their selflessness also has a self-interested side. Voluntary waivers may alleviate political and popular pressure for harsher compulsory restrictions.
But as a signal to the rest of the workforce, these acts are more powerful – and probably more effective – than any heavy-handed, government-mandated embargo on big pay-outs. The question is how long it will take for the message to get through.
Many still appear to think financial institutions should worry if their compensation system is insufficiently attractive to retain talent. But on both sides of the Atlantic, the likely survivors of the crisis are besieged by job candidates. GLG Partners’ Noam Gottesman reported last week that the London-based, US-listed hedge fund group was experiencing a “massive surge” in people seeking work. Solid companies need only hold out a net to catch talent and then discard the least attractive prospects.
This is precisely the moment to propose, as UBS has, a “malus” element in executive remuneration – a stick to go with the abundant carrots already available to reward outperformance (and, potentially, recklessness). The financial sector worldwide has shed an estimated 150,000 staff. Citigroup is only the latest to make clear that there are more cuts are to come. So for the next year or more, your job is your bonus. Battered bank chiefs – especially those still in a position to renounce their pay-outs voluntarily – know that better than most.
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