In accordance with the most common stereotype, bankers of the highest sort should only drive the best cars and have small fortunes hidden in their high-end villas. But is that true, as we are witnessing yet another financial crisis in our lifetimes? Shouldn’t financial institutions have more restraint when it comes to paying bonuses to their bankers?
As Andy Samu in his Disruption Banking piece indicates, the bonuses received by some of the best bankers in the business add up for astronomical sums. Or maybe this image has been planted in our heads by big Hollywood pictures, and the reality is not what everyone expects it to be? But whatever the truth is, the unprecedented year of 2020 must have turned things around for everyone, bankers included. How will their bonuses look now, in the era of COVID-19?
Back in 2018, the CEO and Chairman of BlackRock, Laurence Fink, has started the debate about the salaries of the CEOs. In an annual letter to other CEOs from all over the world, he stated that society demands that all companies, public or private, work for the greater purpose, and not only in order to accumulate goods. Financial prosperity is not the only task they have to accomplish, because there is a lot of room for them to make something good for society as well.
Then the global virus shook the world and all of a sudden another financial crisis hit almost every branch of every business. Following the words of Andrea Enria, the Chairman of European Central Bank, the financial sector must be really careful when it comes to paying bonuses, as he also stressed the importance of “extreme moderation” exercising in that matter. The Italian has since then gone on to put emphasis on banks’ role in fighting climate change too.
New priorities for the global banking
It looks like money may have been pushed further down the list of banks’ priorities, as more and more emphasis is being put on diversity, climate change, and making a valuable contribution to society.
In 2020, the Bank of England has expressed that they expect all companies to send a special letter to HM Treasury, where they would commit to holding restraint with dividends payment, as well as with senior pay and distribution of capital. This of course is applicable only to the companies that are using Government’s loans, but their message is clear.
The fortunes of bankers
During the previous Finacial Crisis a lot of people were looking really carefully at Goldman Sachs’ actions, as they were helping AIG. Nowadays the subject of moderation has been irreversibly written into the agenda, so it is rather unlikely for companies now to act the same way.
Many years later, Goldman Sachs’ UK head appeared to be one of Wall Street’s leaders of that time. He was also later dragged through the UK’s Parliament Select Committee, as he was questioned as part of the BHS investigation into Phillip Green. His name is of course Michael Sherwood, and his Wikipedia page says that he is now worth “only” £195, which is rather incomparable to Michael Platt’s £4.69billion.
Down further in his article, Andy Samu stresses, how some companies like JPMorgan are now unable to pay big bonuses to their bankers, even though with the old agenda they would surely be applicable for them, as they managed to help their company gather great goods. To enter the original Samu’s piece, visit the following link: https://disruptionbanking.com/2020/05/21/extreme-moderation-or-restraint-how-will-bankers-bonuses-look-in-2020/