The ink hardly had time to dry on the Financial Services Authority’s (FSA) code of practice on banking and financial sector pay and bonuses before it was overtaken by events.
The Code on Reforming Remuneration Practices in financial services sets out to reduce risk at 26 large banks and financial firms by linking the bonuses and overall compensation of high-earners to their companies’ performance over time. Lest we forget, the code was created to assuage public anger, voiced by politicians, about the apparently huge earnings of some banking and financial industry senior executives no matter how well their employers performed.
We cannot be certain how effective the code will be in achieving its aim, but it seems certain that it will be judged far too light a touch by the public, and that politicians will pander to the electorate’s disquiet about the return of big bonuses and pay rises.
Senior politicians such as Lord Mandelson and George Osbourne are making noises about introducing curbs on bankers’ pay and bonuses, especially at those institutions that were saved by the taxpayer during the past year or so. How they plan to achieve this will be worth waiting to see, as interfering with employment contracts would make splicing the Gordian knot seem like child’s play.
Yet, if votes are to be won, there is little politicians won’t do.
That aside, the focus of the code on 26 big institutions will only encourage team moves and poaching in the City. The word among employment lawyers plying their honest trade in the Square Mile is that defections are prompting a significant rise in employer actions against those they see as the disloyal.
Finally, the code also calls for affected employers to pay due heed to equal pay and non-discrimination in their remuneration structures. What has this to do with minimising risk?
One for mystic Mandy, I think.
John Charlton, editor