The FT has reported:
The Financial Services Authority has backed away from specific recommendations on how bankers’ bonuses should be structured for fear they could undermine the UK’s international competitiveness, people familiar with the matter say.
The City regulator’s final remuneration code, due to be unveiled on Wednesday, still focuses on requiring bank boards and management to link pay more closely to risk.
Hector Sants, FSA chief executive, writes:
“Such an approach cannot work if it is only applied in the UK”.
This is utter nonsense, but just exactly what I’d expect from a regulator who is a banker — and precisely why chums should not regulate chums.
In response there is a great letter in the Guardian today from 12 UK business school professors who argue that there is no case for bonuses. Hallelujah, say I! At last some have found their voices. This one is to important not to reproduce in full:
As professors working in UK business schools, we reject the justifications put forward by the banking industry for the bonuses currently being awarded to staff (RBS chief: if we can't pay bonuses, it's the taxpayer who will suffer, 8 August), and we call for all political parties to endorse a windfall tax on bonuses to fund shortfalls in monies for public services, the arts and international development.
When the financial services sector plunged the UK and world economies into deep crisis through reckless, bonus-fuelled trading and investment, UK taxpayers stepped in to save the sector and the economy from ruin. Taxpayers provided funds not just to save individual banks, but to guarantee all banks. This bailout, together with the recession caused by perverse incentives in the sector, now threatens public services with severe funding shortfalls. It is time for workers in the financial services sector to reciprocate and save hospitals, schools, development projects and the arts from cancellations and cutbacks through a windfall tax on all bonuses.
Moreover, as chairs in business schools, we know first-hand of large reserves of talented students eager for places in the sector and we reject the idea that huge bonuses are necessary to attract or retain staff in these industries.
We reject the analogy with footballers and actors, whose industries have not received a massive industry-wide bailout, and are not backed by continuing government guarantees.
We further reject the idea that a windfall tax on bonuses will prompt these industries to move en masse to Zurich or Dubai, forsaking the connections to other services, to the metropolitan lifestyle, and to the family advantages of London.
Finally we reject the notion of superiority fostered by some firms, and some business schools, that providing financial services to society is worth hundreds of times more than providing services in nursing or transportation or childcare.
We call therefore for a windfall tax on bonuses to individuals in the financial services sector, across all firms and services, to be put into effect immediately.
Professor Chris Carter St Andrews University School of Management,Professor Peter Case UWE Bristol Business School, Professor Bill Cooke Lancaster University Management School, Professor Christine Cooper, University of Strathclyde Business School, Professor Peter Fleming and Professor Stefano Harney Queen Mary, University of London School of Business and Management, Professor Emeritus David Knights Keele University Business School, Professor Simon Lilley University of Leicester School of Management, Professor Stephen Linstead York University Management School, Professor Alan McKinlay University of St Andrews School of Management,Professor Martin Parker University of Leicester School of Management, Professor Hugh Willmott Cardiff University Business School, Professor Andrew Sturdy Warwick University Business School, Professor Sonja Gallhofer Dundee University School of Accounting and Finance
I’m delighted to find there are people of real courage in the business schools.
Well done them.