Bonuses, Banks and politics

[baypond]

Sarkosy "I was scandalized to see the lessons of the crisis being forgotten so quickly by some people at a time when the page has not even been turned on the crisis,"

Mr. Sarkozy said banks would henceforth be required to defer two-thirds of bonuses paid to traders over three years and make a third of the payout in bank stock.

At the risk of courting controversy, politicians are doing what they have done since the begining of time. Making it look like they are doing things that the populous want to see happening. In truth, bonus payments in banks generally consist of about 30/50% stock defered for a period of time - usually 3 or 4 years. There is usually a cash component which is paid out at the time. For all this talk about clawing back past bonuses for poor performance, it effectively happens through the stock price. The bank I work for saw its share price fall 98% before rebounding a little, but is still down 90%. That means that annual bonuses were effectively written down for the past 3 years to 60% of the initial level.

I am not trying to show an opinion on the subject of bonuses, just to make people aware that for all the rhetoric, much of it is hot air.