Bankers are now hoist on their own austerity petard. The fact that ordinary citizen all across the Eurozone are seeing lower incomes, lower levels of social services, and can expect only more of the same seems to have led to a sudden outburst of resolve to make sure that bankers take the pain along with everyone else. The Financial Times gives the overview:
Bankers’ bonuses in Europe would be capped at two times fixed salary under a tentative EU agreement that would mark the most severe crackdown on pay since the 2008 financial crisis.
The European parliament and negotiators for member states drafted a deal in Strasbourg on Thursday that would impose a 1:1 bonus to salary ratio, which can be increased to 2:1 with the backing of a supermajority of shareholders.
The draft terms, which would apply to all banks operating in the EU, will come as a shock to the industry, which was bracing itself for a fixed cap of some kind but was relying on the UK and Germany putting pressure on to relax the limit.
Now this is quite a way from getting done, particularly since at the beginning of the year, Cyprus will no longer be managing the negotiations and Ireland will step into its place. In addition, the idea of setting a cap on bonuses without restricting salaries is just asking for banks to increase salaries, which they also did the last time bonus caps were mooted, right after the crisis. It would be much better to impose a maximum wage, say of 25 times the pay of the lowest paid worker, including contractors who work more than a specified number of weeks a year (with pay of part-timers grossed up to full time equivalent).
But what is striking is the strength of the sentiment:
Britain will lead calls for the bonus cap to be scrapped or raised significantly. But its strong stand is relatively isolated in the European Council, especially because ministers are reluctant to suffer political fallout from defending the rights of highly paid bankers. A final decision can be taken by majority vote…
One senior eurozone diplomat involved in the talks said many countries had taken the decision to broadly accept whatever compromise was reached in the negotiations with the parliament. “We don’t care about the number, there is no way we are standing up for excess pay,” he said.
Bankers are wily and politicians are easily distracted. But the public might not be. While I don’t give this particular measure much hope, the desire to clip the wings of financiers is likely only to intensify, and that will lead to some intriguing political theater.
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Political theater? Would that be anything like the final Acts of MacBeth?
“Lay on, Macduff, And damn’d be him that first cries, ‘Hold, enough!'”
Or in the immortal words of Woody Allen:
“We stand today at a crossroads: One path leads to despair and utter hopelessness. The other leads to total extinction. Let us hope we have the wisdom to make the right choice.”
Haven’t seen the details, but they’ll probably leave enough holes to allow bonus to be paid for through an off shore entity and classified as Fee for Consulting Services or what have you. The entity will then be loaded with Bonus Swaps with a notional value of at least a trillion dollars to make sure that it’s too big to fail. Hallelujah.
Let’s take our cue from this and go to work on the maximum wage:
http://www.nakedcapitalism.com/2011/07/doug-smith-the-maximum-wage.html
Who is a banker? Anyone who works at a bank? Or anyone who does bankerly things?
It would, I suppose be one way of reintroducing Glass Stegal without actually having to spell it out.
WHEN are the parasites at the top ever paid the way us bottom 90% feeders are paid?
How much can I replace your ass for?
About that experience and skill thing – I find it laughable to think that anyone could work in some industry for less than 10 or 15 years and be valuable as leader on the big stage —
and WHY does it take 20+ for these execs to get the gold ring?
so those running the orgs KNOW you won’t rock the boat and betray the exec washroom crowd as a bunch of thieving f’king parasites.
managers are workers, not gawds. it should be that if any one set of the 3 sets of stake holders in a org gets too much, the others get zilch when the org collapses. investors / owners AND customers AND employees – oh yeah, and, BTW, owners after your big clean up for funding the next google boeing ford, you get dividends – and, if that ain’t enough for your wannabee aristocrat butts, take your treasures and go to somalia … good luck.
rmm.
In the 1990s American CEOs earned 500 times what their median workers earned. By 2003, the ration had fallen to 300 times. In continental Europe the ratio was 11 and 19 to one. http://www.businessweek.com/stories/2001-04-17/spreading-the-yankee-way-of-pay
As of this year it is 231 times the average worker’s pay in the U.S. http://www.economist.com/blogs/graphicdetail/2012/05/ratio-ceo-worker-compensation
Boo Hoo. It’s hard to calculate the median income because we are global company story here:
http://online.wsj.com/article/SB10001424052702304458604577490842584787190.html
Ratio of CEO pay to average worker by country: http://creativeconflictwisdom.wordpress.com/2011/10/07/ration-of-ceo-pay-to-average-worker-by-country/
So the average ratio of CEO to worker pay for most of the “civilized democracies” is low at 12:1 or 20:1. And the US seems to always hover around 500:1.
European workers fought for better hours, longer vacations, a voice on the corporate boards and other quality of life ideas like paternity and maternity leaves and secure retirement that leads to a feeling of worth in the system. Meanwhile in the U.S. workers leadership focused on pay and “getting better Democrats elected.” How did that work out? Worthless.
It’s the inequality, stupid.
Here’s perhaps a better site for the whole income inequality and CEO pay deal. Prof William Domhoff at UC Santa Cruz
http://www2.ucsc.edu/whorulesamerica/power/wealth.html
Here’s a recent article on US CEO pay: http://projects.nytimes.com/executive_compensation
It makes sense for profits to be put back into the company in the form of research and development and worker’s wages. We have then more innovation, more cures, and more well being.
Why should the maximum pay be a 25-to-1 ratio? That is still far too high. In Mondragon, the world’s biggest cooperative, maximum pay is four times the pay of the lowest worker, although I think there are some units where there can be a 6-to-1 ratio. A 4-to-1 ratio is plenty high enough.
The financiers, speculators and CEOs who rake in millions a year can only buy so many yachts and mansions. Luxury consumption by the 1% can’t possibly make up for the lack of spending power by all us working stiffs, even if there were a reasonable rationale for such exhorbitant pay, which there is not.
Perhaps some believe they can build a deep enough moat and a high enough wall to keep the world outside; perhaps some believe that they’ll be gone by the time everything collapses so they don’t care. Surely some believe the nonsense scribbled by their paid public relations agents; oops, excuse me, “think tanks.” But no matter which, it’s irrational and unsustainable.
Dimitry Orlov calls the people at the top of companies “senior lunch eaters”. They “tend to spend all of their time pleasing each other in various ways, big and small. They often hold advanced degrees in disciplines such as Technical Schmoozing and Relativistic Beancounting…Somewhere down the hierarchy are the people that actually do the work…”
These lunch eaters at the top “portray themselves as super-achieving entrepreneurial mavericks who can’t get pinned down to a mere set of marketable skills.” (from “Reinventing Collapse”).
And these tippy toppers keep the folks further down competing with each other. Bad system.
“Dimitry Orlov calls the people at the top of companies “senior lunch eaters”. They “tend to spend all of their time pleasing each other in various ways, big and small.”
Bad image – must get some mind bleach.
How about a pay structure that makes the first last and the last first? Pay the most for the least pleasant, most dangerous jobs. Top earners would be janitors, miners, fishermen, etc.
People who sit on their asses all day ordering people around would get minimum wage.
I like it.
So far the best idea ive seen for the economic crises is this.
http://systemicdisorder.wordpress.com/2012/11/07/self-directed-workers-as-a-cure-for-capitalism/
Simplest restriction which would help is to prohibit CEOs from being paid at all. The CEO should be required to buy stock in his own company, using his own money (perhaps from previous jobs in the company), and to profit *entirely* off the stock.
This regulation, however, would apply to lower-level bankers, and will probably work for them.