Financial services HR chiefs have voiced fears about the knock-on effect the intense public and political scrutiny of City bonuses might have on their business.
The Financial Services Authority (FSA) is set to be handed the power to get tougher on bankers’ bonuses, with chancellor Alistair Darling ordering a review into the sector’s salaries and bonuses as part of a wider study of the practices of banks based in the UK.
Prime minster Gordon Brown even suggested last week that banks should be able to claw back bonuses paid to staff who lose money.
However, Ian Davidson, head of compensation and benefits at Commerzbank, said attacking bonus levels would do little to help the necessary restructuring of the financial services sector.
Bonuses were vital in recruiting top bankers and traders, he wrote on a networking site.
|Bob Mecrate-Butcher, employment lawyer and partner at law firm Pinsent Masons, says that in the midst of calls for banks to cut bonuses the key question to ask is what type of bonus are you looking at.|
“The current blame game being played against individual investment bankers’ earnings by the politicians and regulators is a smokescreen so [they] can absolve themselves of the blame that as equally attaches itself to them,” Davidson said.
“The labour market in investment banks is complex, multinational, secretive and fast moving. If an individual makes £20m for their employer, why should they not get paid a percentage?”
A spokeswoman for the FSA said the sector was “in a different world now” from 18 months ago,and the watchdog would announce new measures on bonuses next month.
Elsewhere in the financial services sector, outside of investment banking, there were concerns that excessive regulation would affect practices that were nothing to do with the credit crunch.
Richard Walden, HR director at Barbon Insurance Group, said: “We are FSA regulated, and we would be worried about any measure that impacted on our ability to [set appropriate bonuses]. They are modest compared to the big numbers that are talked about in the banking sector they are part of our strategy on recruitment and retention, but they are also there to motivate people to do the right things.”
Chartered Institute of Personnel and Developmentchief Jackie Ormesaid HR professionals needed to take a long-term view on whether bonuses helped the business and challenge practices that did not.