The prime minister has declared that 'the days of big bonuses are over', understandably peeved at having to shore up our crumbling financial sector to the tune of £500bn of taxpayers' money. Meanwhile, the Financial Services Authority has threatened tighter controls on City remuneration structures, warning that they should not reward short-term risk-taking. Yet some banks have had the gall to signal their reluctance to clamp down on payouts to staff. Competition in the sector is still fierce, after all, and the need to give incentives to top profit-making talent more pressing than ever. Organisations with contractual bonus schemes also risk legal action if they unilaterally make changes or fail to honour current commitments. Even where bonus entitlement is expressed to be totally discretionary, disgruntled brokers might claim that the exercise of discretion to award a low bonus or none at all was irrational or based on irrelevant factors. And it is fanciful to suggest we have seen the last of six-figure sex- and race-discrimination claims challenging bonus decisions. Over time, pressure on the banks will undoubtedly lead to more formalised and closely regulated executive pay arrangements. But rumours of the City bonus culture's demise are greatly exaggerated.
Published: 01 Dec 2008
Last Updated: 31 Aug 2010
Michael Burd and James Davies, Lewis Silkin LLP solicitors - e-mail: