The actions of Deutsche Bank and Lloyds to withhold bonuses from staff is “very good news for financial stability across the world”, according to an
academic who studies executive pay.
Earlier this week, German newspaper Handelsblatt reported that the supervisory board at Deutsche Bank decided in July to withhold bonuses awarded to seven top managers in 2011. The board reportedly made this decision in response to mounting legal bills connected to regulatory fines. A Deutsche Bank spokesman confirmed the news in general but declined to comment further.
Separately, Lloyds Banking Group says that the eight members of staff it sacked in disciplinary action related to allegations of rate fixing will forfeit incentives worth £3 million (€3.9 million).
According to John Thanassoulis, professor of financial economics at the Warwick Business School, the news is welcome because it may help push pay and incentives towards safer levels.
“Banks have always deferred some payments and bonuses to ensure their employees did not forget the long-term,” he says. “However, as bankers have become more internationally mobile, many banks have responded not just by increasing pay, but by reducing the proportion of pay they defer and relaxing the claw-back regime.”
Thanassoulis says a new trend in regulatory and investor sentiment, which would force banks to defer or claw-back more bonuses, would make banks more resilient.
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