MyCIMA

Should government decide bankers' pay?

Posted: Monday 02 November 2009 by Danielle Cohen
Replies : 5
Keywords: banking, ethics, finance, regulation

Both the UK and US governments have recently brought out guidelines on how the banking sector should remunerate its employees. Do you think they are right to do this? Are these governments interfering in business or do we need more of this type of regulation to stop the same mistakes from being made in the future?

 Have you had experience of the government in your region taking any similar steps?

Central bank policies - arm of government intervention

Posted by Goh Pei Loong on Tuesday 03 November 2009 02:44
Though there is no precedent for government to intervene in banks' remuneration policies during the past. But government via central bank can regulate and influence banks guidelines and bank policies. But fair action is still the criteria. Otherwise respective government agency may be sued for unfair practices.

Public interest

Posted by Cliff Moggs on Tuesday 03 November 2009 20:22
Hopefully the purpose of any Government is to step in, when in the public's interest, there is clear expression of why? Today RBS fired, what some 4000 'front line' people. Sir Fred Goodwin quietly collects his pension 'rights'. Are these 4000 people going to have their service years pension credit increased by 10 years, will they be able to negotiate their redundancy? I don't think so. If Governments aren't to tackle difficult issues, who will? Yours sincerely Cliff Moggs

PEOPLE HAVE DEGENERATED TO A HIGH DEGREE

Posted by Goh Pei Loong on Wednesday 04 November 2009 03:40
Wise people from older generation are still wiser than new generation wise people. Furthermore nowadays people who sat on top of any organisation have MORE PERSONAL AGENDA THAN EVER. Personal gain growing stronger everyday than public interest so to speak. DEGENERATED GENERATION CAUSED GOD'S ACT ON NATURAL DISASTER TO REMIND US TO SHARE AND BE GRATEFUL WITH WHAT WE HAVE.

Ethics of compensation

Posted by Cliff Moggs on Thursday 05 November 2009 20:03
Further thoughts, rather than seek views on ‘banker’s bonuses – government regulation’ why not have CIMA play a ‘leading role’ in ‘Compensation Standards for the 21st Century’. Peter Drucker wrote in 1973, “(Managers) tend to violate the rule ‘not knowingly to do harm’ with respect to executive compensation. Neither does this exclude a ‘rational system of taxation’. His ‘next section’ is on ‘golden fetters’, people who are in the wrong place but remain because the ‘benefits are ‘too good’. (Incidentally the ICAEW Annual Accounts has far more detail on compensation paid to staff than CIMA – another example of CIMA’s lack of openness) I believe that the cause for SOX (Sarbanes-Oakley) is a more interesting question to ask, “Why is there ‘government’ interference in the accounting profession (in the USA)?” Through the FRC the UK has taken a ‘softer’ approach but nevertheless the expectations are exactly the same. Presumably the ‘internal control’ (albeit an archaic term for what it is) would cover any bonus system design and equally authorisation for payment at the highest level. The ‘bankers’ or in reality the minority get ‘headline bonuses’ so don’t you have to look at the complete topic, ‘compensation standards’? Have the ‘banker’s bonuses violated the entities internal control requirements’? I would not think that they have, so it is not a ‘weakness’ in ‘internal control’. The ‘ethical’ question is more challenging. Best regards Cliff Moggs

When did government get to know all the answers?

Posted by Adrian Rutter on Friday 11 December 2009 10:29

This is a bit of a UK-centred view, but, Danielle, by 'government' you presumably mean the Parliamentarians who've just spent the last year or so dreaming up ever more imaginative ways to justify their expense claims because 'they were only acting within the rules'? Or the PM and Chancellor who've brought us to a level of public debt seemingly limited only by them running out of room to print the zeros in the Budget Red Book?

In the massively complex world of today, government and central banks do need to regulate on matters like banks' levels of reserves and asset:lending ratios. Beyond that SARBOX and the like are demonstrably expensive and ineffectual; it's the shareholders and the stakeholders who should be holding management to account - and not just in banks. For whatever reason, they've signally failed to do that.

As Clifford suggests, the simple key to all this is transparency.

And, as an Institute and as individuals, we're the people best-placed to bring all the relevant information into the open. Fresh air and sunshine are generally the best disinfectants. It was publicity and public ridicule that brought down the Ku Klux Klan; it'll be open information that inspires, encourages and enforces high standards of ethics and performance in business in general. Publish the rewards and remuneration, by all means anonymously, but at the very least identifiable by level of corporate responsibility. And do that for ALL entities. All sorts of good practice can then be acknowledged, all sorts of bad practice can be corrected.

What about making that CIMA's next key strategy?