- Joined
- Jul 24, 2008
- Messages
- 33,627
- Points
- 0
<TABLE cellSpacing=0 cellPadding=0 width=452 border=0><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published March 30, 2009
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>RUN-UP TO G-20 SUMMIT
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Bankers' bonus partly blamed for crisis
IIF report says pay policy led to excessive risk-taking and that reforms are under way
By ANTHONY ROWLEY
IN TOKYO
<TABLE class=storyLinks cellSpacing=4 cellPadding=1 width=136 align=right border=0><TBODY><TR class=font10><TD align=right width=20>
</TD><TD>Email this article</TD></TR><TR class=font10><TD align=right width=20>
</TD><TD>Print article </TD></TR><TR class=font10><TD align=right width=20>
</TD><TD>Feedback</TD></TR></TBODY></TABLE>
A REPORT by the Institute of International Finance (IIF) has acknowledged that bonuses paid to bankers and other financial industry executives have, in many cases, been out of line with professional performance and with the wider interests of their firms.
The Washington-based IIF, which speaks on behalf of the world's leading financial institutions, also admits that compensation was a factor in the excessive 'risk-taking' that led to the current financial crisis. The report comes at a time when financial executives are under intense public criticism in the US and elsewhere for alleged 'greed' and irresponsibility, and ahead of this week's G20 summit in London where financial industry compensation is expected to figure prominently.
The report is based on a survey among leading finance firms in North America, Europe and Asia by the IIF, which has 308 members worldwide.
Banks and other finance houses surveyed agreed that 'compensation structures may have been one of several factors underlying the current market crisis'.
The survey revealed that individual firms are afraid to reduce compensation levels for fear that they will 'lose talent' to competitors. This dilemma can only be resolved 'as the process of reform moves forward through the industry', the IIF said.
<SCRIPT language=javascript> <!-- // Check for Mac. var strAgent; var blnMac; strAgent = navigator.userAgent; strAgent.indexOf('Mac') > 0 ? blnMac = true:blnMac = false; if (blnMac == true) { document.write('
'); } //--> </SCRIPT><TABLE cellSpacing=0 cellPadding=4 width=300 align=right border=0><TBODY><TR><TD vAlign=top align=middle>
<!-- AdSpace --><IFRAME marginWidth=0 marginHeight=0 src="http://ads.asia1.com.sg/html.ng/site=tbto&sec=btointhenews&cat1=bnews&cat2=btointhenewsart&size=300X250" frameBorder=0 width=300 scrolling=no height=250 bordercolor="#000000"><script language='JavaScript1.1' src='http://ads.asia1.com.sg/js.ng/Params.richmedia=yes&site=tbto&sec=btointhenews&cat1=bnews&cat2=btointhenewsart&size=300X250'></script><noscript>
</noscript></IFRAME><!-- /AdSpace-->
</TD></TR></TBODY></TABLE>Conducted by the IIF in collaboration with consultancy firm Oliver Wyman, the survey found 'wide agreement that compensation incentives should not induce risk-taking in excess of the firm's own risk appetite'.
It also showed 'significant support for the view that compensation should include a component reflecting the firm's overall results in line with sound risk management and business goals'.
Rick Waugh, president of Scotia Bank and co-chairman of an IIF committee on market best practices, said that 'at a number of firms there has been a culture that has fostered employee bonus expectations not consistent with long-term performance, with current conditions in the market or with sound risk management practices'.
'We are now seeing a whole range of fundamental changes in industry practices that are principles-based and that is very encouraging,' he added.
Financial services firms are moving forward with far-reaching changes in their approaches to employee compensation, said the IIF. These reforms reflect the principles published by the IIF in July 2008 and by the Financial Stability Forum.
These principles 'aim to ensure effective governance of compensation, alignment of compensation with prudent risk taking, and effective supervisory oversight and stakeholder engagement in compensation'.
Klaus-Peter Mueller, chairman of Commerzbank, said the 'majority of firms surveyed are moving towards full alignment with the principles, and they are doing so on an urgent basis. The consensus around the direction of change in industry compensation practices is unprecedented'.
The IIF report added that 'a lot of work still remains to be done to fully reform compensation structures'.
But it noted that a number of firms have already developed systematic approaches towards reflecting risk in performance measurement, handling deferred compensation mechanisms and establishing governance standards for the overall compensation process.
</TD></TR></TBODY></TABLE>
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>RUN-UP TO G-20 SUMMIT
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Bankers' bonus partly blamed for crisis
IIF report says pay policy led to excessive risk-taking and that reforms are under way
By ANTHONY ROWLEY
IN TOKYO
<TABLE class=storyLinks cellSpacing=4 cellPadding=1 width=136 align=right border=0><TBODY><TR class=font10><TD align=right width=20>
</TD><TD>Email this article</TD></TR><TR class=font10><TD align=right width=20></TD><TD>Print article </TD></TR><TR class=font10><TD align=right width=20></TD><TD>Feedback</TD></TR></TBODY></TABLE>A REPORT by the Institute of International Finance (IIF) has acknowledged that bonuses paid to bankers and other financial industry executives have, in many cases, been out of line with professional performance and with the wider interests of their firms.
The Washington-based IIF, which speaks on behalf of the world's leading financial institutions, also admits that compensation was a factor in the excessive 'risk-taking' that led to the current financial crisis. The report comes at a time when financial executives are under intense public criticism in the US and elsewhere for alleged 'greed' and irresponsibility, and ahead of this week's G20 summit in London where financial industry compensation is expected to figure prominently.
The report is based on a survey among leading finance firms in North America, Europe and Asia by the IIF, which has 308 members worldwide.
Banks and other finance houses surveyed agreed that 'compensation structures may have been one of several factors underlying the current market crisis'.
The survey revealed that individual firms are afraid to reduce compensation levels for fear that they will 'lose talent' to competitors. This dilemma can only be resolved 'as the process of reform moves forward through the industry', the IIF said.
<SCRIPT language=javascript> <!-- // Check for Mac. var strAgent; var blnMac; strAgent = navigator.userAgent; strAgent.indexOf('Mac') > 0 ? blnMac = true:blnMac = false; if (blnMac == true) { document.write('
'); } //--> </SCRIPT><TABLE cellSpacing=0 cellPadding=4 width=300 align=right border=0><TBODY><TR><TD vAlign=top align=middle>
<!-- AdSpace --><IFRAME marginWidth=0 marginHeight=0 src="http://ads.asia1.com.sg/html.ng/site=tbto&sec=btointhenews&cat1=bnews&cat2=btointhenewsart&size=300X250" frameBorder=0 width=300 scrolling=no height=250 bordercolor="#000000"><script language='JavaScript1.1' src='http://ads.asia1.com.sg/js.ng/Params.richmedia=yes&site=tbto&sec=btointhenews&cat1=bnews&cat2=btointhenewsart&size=300X250'></script><noscript>
It also showed 'significant support for the view that compensation should include a component reflecting the firm's overall results in line with sound risk management and business goals'.
Rick Waugh, president of Scotia Bank and co-chairman of an IIF committee on market best practices, said that 'at a number of firms there has been a culture that has fostered employee bonus expectations not consistent with long-term performance, with current conditions in the market or with sound risk management practices'.
'We are now seeing a whole range of fundamental changes in industry practices that are principles-based and that is very encouraging,' he added.
Financial services firms are moving forward with far-reaching changes in their approaches to employee compensation, said the IIF. These reforms reflect the principles published by the IIF in July 2008 and by the Financial Stability Forum.
These principles 'aim to ensure effective governance of compensation, alignment of compensation with prudent risk taking, and effective supervisory oversight and stakeholder engagement in compensation'.
Klaus-Peter Mueller, chairman of Commerzbank, said the 'majority of firms surveyed are moving towards full alignment with the principles, and they are doing so on an urgent basis. The consensus around the direction of change in industry compensation practices is unprecedented'.
The IIF report added that 'a lot of work still remains to be done to fully reform compensation structures'.
But it noted that a number of firms have already developed systematic approaches towards reflecting risk in performance measurement, handling deferred compensation mechanisms and establishing governance standards for the overall compensation process.
</TD></TR></TBODY></TABLE>
