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The City: lower bonuses, higher wages - Analysis

Wednesday April 27,2011,

Following the announcement of lower bonuses offset by higher wages for The City employees, Chris Roebuck, Visiting Professor at Cass Business School (City University, London) shares his view on the topic.

"The banks are doing exactly what the Government told them to do, reduce bonuses. But the banks won’t reduce total remuneration as any bank that did so would be out of line with the market and loose its top performers to competitors in London. We keep forgetting that there are about 21 major overseas banks in London who have no obligation at all to do what the British Government says. They will set pay levels at what they think is appropriate for the global banking market not just the City of London. Thus the UK banks have to follow suit or their people just walk across the road to an overseas bank.

“The politicians have painted themselves into a corner by constantly saying that bonuses are the cause of all the problems in the banking sector, they are not, it’s just an easy sound bite that they have used for years and its coming back to haunt them. Bonuses are inherently safer than base pay for everyone, the former is pay for performance delivered, the latter pay in the hope of delivery. Total compensation is the real issue for organisations, regulators and shareholders - do senior executives get too much of the corporate cake for the benefits they deliver? Why should senior banking leaders get, pro rata compared to the average pay in their sector, nearly twice as much as those in other sectors and up to 10 times as much as those in the public sector? Are they really that much better as leaders? Or are they just in an industry where pay has got out of control over a number of years?"

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