EU May Cap Bonuses for Bankers
BRUSSELS — The European Union moved a step closer Thursday to imposing strict curbs on bonus pay for bankers, which has been blamed by many politicians for inciting the risk-taking behavior that set off the financial crisis.
A provisional agreement struck by the European Parliament, the European Commission and national representatives could mean that the coveted bonuses many bankers receive will be capped at the level of their annual salaries, starting next year. The proposal would allow bonuses of as much as double the salary if a sufficient number of a bank’s shareholders agreed.
The agreement, as it stands, is a blow to Britain, which partly relies on generous remuneration packages to ensure that the City of London remains the biggest financial center in Europe and the overseas home of banks from around the globe.
Source: New York Times. Read full article. (link)
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Capping bonuses to bankers is stupid.
Now making the bonuses contingent on stock prices 5 years down the road might be a good idea. That way a banker will have a disincentive to do something stupid or illegal, cash out and leave before the shit hits the fan. However, the banks themselves ought to be doing that without governmental interference.