On Monday Mark Carney, Bank of England governor, injected fear into the hearts of highly paid bankers everywhere by stating…
Standards may need to be developed to put non-bonus or fixed pay at risk. That could potentially be achieved through payment in instruments other than cash. Bill Dudley’s recent proposal for certain staff to be paid partly in ‘performance bonds’ is worthy of investigation as a potentially elegant solution. Senior manager accountability and new compensation structures will help to rebuild trust in financial institutions. In a diverse financial system, trust must also be rebuilt in markets.
His comments came on the back of growing regulatory concerns that banks avoid bonus caps by boosting fixed salaries and so offer less variable pay, weakening the link between performance and compensation. Read more
So the bank has paid around $20bn in fines, penalties, etc, but Wall Street’s favourite chief executive is going to get a raise, said Dealbook.
Without being an apologist for the bank, we think this is the reason he might feel justified in asking for some more green (with help from Wolfram Alpha): Read more
Beyond a certain point, incremental increases in income stop making a difference to someone’s satisfaction with his or her lot in life.
After obtaining a nicely stocked humidor, a couple of Bentleys, a Patek Phillipe, an account with Coutts, and membership at The Hurlingham Club, what else is there, really? Maybe there’s nothing. Maybe we should ask the miserable bankers making a million who are struggling to
get by keep up with their equally wealthy peers…
But do not despair! For it turns out that more money does seem to equal higher reported life satisfaction! Even at relatively high levels of income! Even though we’re not in a position to be relived ourselves about that (media — it’s a booming industry, kids), we’re very happy for those of you who are! Read more
Probably best to just get on and crowd-source the analysis and commentary on this one:
In Part 1, we looked at the Futuretrack data that showed female graduates in the UK earning less than their male colleagues. This appears to hold even when graduates did the same degree, went to a similar university, and so on. It is particularly concerning to see data that show women start out on lower pay, given the potential knock-on effects for one’s future earnings.
In this post, we move on to look at a few academic studies about why this might be, particularly around pay negotiation. Read more
Hurrah, it’s International Women’s Day! Time for a bunch of reports informing us of much less we earn than men! Aren’t you excited?
- Sample data finds that women aren’t paid as highly as men, while holding various factors constant.
- Off into the tumbleweeds of academic studies that try to determine why.
- A pundit in question writes about it. (Why, hello…)
…potential thus exists for the formation of a”vicious cycle” where increases in disparity weaken concern for wage equality or redistribution. This weakened concern affords greater future compensation differentials, a shrinking of the welfare state, and so on that further increase inequality and again shift preferences.
With all the furore around high pay packets and “capitalism in crisis“, it seemed appropriate to look up what some of the latest academic research has to say. The above is taken from a NBER working paper entitled “Income Inequality and Social Preferences for Redistribution and Compensation Differentials” and it’s by associate professor William R Kerr of Harvard Business School. Read more
Greenhill rushed out strong second-quarter earnings ahead of schedule on Sunday as the US investment bank sought to calm investor fears following the departure of senior executives, the FT reports. Shares in Greenhill had dropped 12 per cent on Friday, the largest one-day fall in the company’s history, following reports that a third managing director had departed to a rival. Greenhill announced second-quarter revenues of $90.8m, an increase of 9 per cent on the same period last year. Advisory revenues of $85.6m represented a 38 per cent increase on the year before. Reliant in large part on the volume of merger and acquisition deals, net income in the quarter of $21m was up from the $17.5m made in 2010, double the consensus prediction of analysts, and a rebound from losses in the first quarter. The WSJ says along with several departures, a slowdown in M&A activity and a hiring spree that sharply raised pay expenses had contributed to questions about the Greenhill, whose shares have declined by 43 per cent this year.
From page 213 of HSBC’s mighty 2010 annual report and accounts.
European regulators plan tougher-than-expected restrictions on bankers’ pay, in spite of concerns raised by French, UK and Spanish officials that the rules could make the EU uncompetitive, reports the FT, citing people familiar with the talks. Discussions concluded late on Thursday and the Committee of European Banking Supervisors is due to issue draft regulations within days. The document will be the basis of a one-month consultation with the industry. Some regulators, who believe the rules are impractical, plan to use the period to push for further changes.
Here’s an entertaining rant from veteran City fund manager Barry Olliff.
It can be found in the annual results statement of City of London Investment Group, as Olliff spells out why the guidelines on pay in the Walker report are wrongheaded, why they won’t be conforming, and why the existing system of remuneration in the Square Mile is broken. Read more
The UK’s coalition government does not plan to legislate to rein in bankers’ bonuses, as the industry itself should regulate its own pay to regain public trust, according to Mark Hoban, the new financial secretary to the Treasury. The Con-Lib coalition government has said it will look at a financial activities tax on bonuses or profits, but Hoban told the FT that such a tax would not proceed without an international consensus, widely considered unattainable. The new government has also ruled out a repeat of 50% payroll tax on bonuses that the Labour government levied last winter.
Many banks still have “deficient” pay schemes that fall short of new standards designed to discourage “imprudent risk”, the Federal Reserve has found. In final rules on compensation published on Monday, the FT reports, the Fed and other bank regulators outlined three principles for incentives: they should not encourage imprudent risk, they should work with effective controls and they should be vetted by board directors.
Earlier this month, Hans Wijers, the newish chairman of the Remuneration Committee at Royal Dutch Shell, said the oil company had learnt its lesson on pay.
Recall, the oil company that suffered a humiliating defeat on pay last year, when shareholders baulked at plans to pay executives a discretionary award for performance from 2006 to 2008 in spite of missing targets. Read more
A rare – and unexpected – defence of the bank-that-everyone-loves-to-hate comes from James Kwak at BaselineScenario who (quite correctly) observes that not many people have commented on Goldman Sachs’s “stunning” compensation announcement on January 21.
Just to remind you, this from the FT’s report: Read more