Reform of the banking sector should not focus too narrowly on pay and bonuses, experts have warned.
In his long-awaited report into corporate governance in the City, released today, Sir David Walker said banks should be forced to reveal the number of staff taking home more than £1m a year in pay and bonuses.
In the future, payouts should also be staggered over a number of years so that banks would be able to withhold rewards from bankers whose deals turn sour, the Treasury-commissioned Walker Review recommends.
Walker carried out the review as part of the government’s response to the near collapse of global financial markets in the wake of the credit crunch.
The Chartered Institute of Personnel and Development (CIPD) welcomed the report, but warned that an over-focus on reward must not obscure the other risks associated with the way people are managed.
Charles Cotton, CIPD policy adviser, said: “We are concerned that the focus on reward practices should not be allowed to hide the need for a far wider focus on the other risks that exist around how people are managed.
“Risk committees need to look beyond just pay and bonuses, to review whether company culture, performance management and appraisal, talent management, leadership and organisational development are also sources of potential organisational hazard.”
Tom Gosling, partner at professional services firm PricewaterhouseCoopers, said the recommendations were “balanced and sensible” but also cautioned against focusing too narrowly on reward.
“Looking at the report, it is clear that the issues were about behaviour both in boardrooms and organisations generally; reward was more of a symptom than a cause” he said. “The best organisations are those that closely integrate their HR practices with their overall aims.”
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But Brendan Barber, TUC general secretary, claimed the City “will be sighing with relief and uncorking the vintage champagne today”.
He said: “This is not the radical road-map needed to reform finance. It will not deal with the bonus culture and the risk-taking that threatens to destabilise the wider economy.”
