Carping, sniping, and griping

Posted by Marc Hodak on January 28, 2011 under Politics, Reporting on pay | Be the First to Comment

In one of the more bizarre articles on bankers pay, we read:

U.S. regulators haven’t yet settled on rules governing pay. Since they don’t yet exist, U.S. rules are perceived as much more lenient than those across the Atlantic.

and:

Despite the griping over Bank of America’s compensation structure, the company seems sensitive to the coming regulatory rules. Even though some bankers are receiving more cash, the total bonus pool for investment bankers and traders was down in 2010 as compared to 2009, said people familiar with the situation. In 2009, the pay for investment bankers and traders was more than $4 billion.

It’s as if any sentences strung together with “pay” and big figures is good enough to get published.

To the extent this article has any substance, it appears to be about the “grumbling” and “sniping” among banks due to differences in how they pay their bankers.

Bank of America Corp. intends to give some investment bankers a greater share of their bonuses in cash, the latest Wall Street compensation move roiling banking chieftains as they meet in Davos, Switzerland.

Still, multiple bankers gathered at the World Economic Forum in Davos grumbled that Bank of America would increase the cash portion of bonuses—news that traveled fast once the bank’s employees were told…The rancor is symptomatic of the heightened sensitivity to the issue of compensation, which took center stage at Davos. European bank executives gathered in the Alps this week are up in arms over the lack of similar rules governing payouts by their U.S. rivals.

“It’s not a level playing field,” said William Vereker, co-head of global investment banking at Nomura Holdings Inc.

If you know about HSBC’s marketing campaign, I.E., about how one thing can be viewed in distinctly different ways, then the following might seem ironic:

U.K. based HSBC Holdings PLC has threatened to move its headquarters elsewhere because of regulations that include compensation rules. The bank said it lost roughly a dozen employees to competitors with more lax rules on pay.

In other words, where some people see an overpaid banker whose pay needs to be curtailed, someone else might see talent ready to slip away.  As usual, the Europeans see anyone making too much money too soon as a social threat:

Such complaints are particularly acute from European bankers, which have to comply with new European Union requirements that bonuses be comprised primarily of stock or other noncash instruments and must be deferred for at least three years. The most cash that can immediately be rewarded is 20% of the overall payout.

Of course, anything that makes payouts more deferred or uncertain makes them less valuable.  If you’re serious about competing, your only alternative (besides changing continents) is to offer even higher compensation.

As the regulators squeezing the balloon on pay, it’s becoming clear that banks will increasingly have to go to their local legislators, with cash in hand no doubt, to plead for competitiveness.  If you think that home country legislators would be sympathetic to such pleas without campaign cash support, you’ve never been greeted by a big guy in an ill-fitting suit saying, “Nice business you got there.  I’d really hate to see anything happen to it.”  And as long as the mob is driven more by personal envy than common interest, these wise guys will keep getting elected, and keep playing chicken with the banking system.