Any large bank operating in the UK could be forced to disclose the pay packages of its eight highest-paid, non-board level executives in a bid to tackle “unacceptable” bonus levels in the City.
The Coalition Government launched a consultation yesterday on the proposed new rules, which would come into force in 2012 in order to cover the current financial year and are expected to hit about 15 financial institutions.
The regulations would be applied to executives with responsibility for managing risk at all banks with assets of more than £15 million, but not to bankers and traders making large one-off bonuses. Disclosing the names or job titles of highly-paid employees would also not be mandatory.
All board-level executives are already compelled to declare their renumeration levels today.
On unveiling the proposals to Parliament, Chancellor George Osborne said that the UK needed “stronger banks, not larger bonuses this winter”. “The Bank of England is absolutely right to say to banks they should be saving any earnings they have to strengthen their balance sheets rather than distributing those earnings in larger bonuses,” he said.
The move came only days after the UK’s most influential shareholder group, the Association of British Insurers, called for a “fundamental shift” in bank pay packages.
According to the BBC, a letter from the Association’s director general, Otto Thoresen, suggested that the balance between employees and shareholders had become “inequitable” and that executives should not be rewarded if company share prices fell.
Moreover, he added that banks should build up capital by cutting staff pay rather than just his members’ dividends and that they expected to see “significantly lower bonus pools and individual awards given the current market circumstances” in future.
On Sunday, deputy Prime Minister said the Government intended to publish new proposals in order to curb “unjustified and irresponsible” awards in terms of private sector pay generally.
Nick Clegg added that Ministers would announce plans to “get tough” on excessive boardroom pay in January and would legislate if necessary. Possible measures include widening the membership of renumeration committees to include staff and making shareholder votes on pay packages binding rather than simply advisory.
