The news that the 100 most senior staff (ie partners) at the London offices of US i-bank Goldman Sachs will have to get by on a maximum bonus of ‘only’ £1m this year comes on the same day that financial services secretary Lord Myners is calling for am independent review into the banking industry. He wants an end to the City’s ‘Greed is good culture.’ So have these two unlikely allies suddenly decided that they are seeking the same goal after all?
Probably not. It’s much more plausible that both are engaged in some heavyweight political skirmishing, jockeying for position and advantage before the main battle over the future of banking regulation commences.
For starters, Goldman’s £1m bonus cap for its London partners is really a symbolic gesture. It’s not an end to big bonuses per se, as there are plenty of senior, non-partner employees who will get over £1m, even though those who do will get 60% of the additional sum in deferred stock.
So it’s clearly not an attempt at root-and-branch reform, although as Goldman owes no money to either the UK or US government’s and has actually had a rather good year, it may not see any need for such radical changes in any case.
Myners’ argument is rather more systemic, and what it amounts to is that, in the relationship between finance and business, the cart is now running away with the horse. ‘We need to re-examine and economic model that seems to work much better for investment bankers than for businesses and workers’ he says. Sentiments that will elicit a rousing ‘hear, hear’ from many firms which have been battered both by the financial crisis and the ensuing recession recently.
Where Myners and Goldman’s bosses do seem to agree is on the political need for bankers to be seen to exercise restraint at present, and that it may even be in their best interests to do so. Donning the equivalent of a Savile Row-tailored hair shirt for a year or two could reduce the risk of having much more onerous restraints imposed upon them. Just look at what president Obama is proposing to do to Wall Street.
But then, if the financial sector was much good at acting in its own best interests, we might never have got into this mess in the first place. Goldman’s may be trying to set an example, or it may just be after a bit of good (or at any rate lesss bad) PR on the subject of the firm’s controversial £10bn global bonus pot.
And while Lord Myners’ may be correct in theory that ‘A global agreement on the issue would be the most important legacy of our response to the crisis’, in practice such an agreement is surely as near to impossible as makes no odds. If he really wants to make a difference, he might be better off pursuing a less ambitious but more realistic goal.
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