If UK Bank Bosses Demand Uncapped Bonuses, Salaries Must Fall: A Financial Perspective
Banking Bonus Caps and Salary Adjustments
In recent developments, Barclays led the way by lifting the EU-imposed bonus cap. However, the critical question remains: what happens to salaries? The previous cap allowed for a 1:1 or 2:1 ratio of bonuses to fixed pay with shareholder consent. As a response, banks increased salaries to counterbalance the perceived loss from bonuses, resulting in substantial pay raises for executives.
Implications for Fixed and Variable Pay
- Barclays was the first to formally abandon the bonus cap.
- Executives' salaries have been effectively doubled.
- The changing landscape poses risks related to motivational structures in finance.
Ultimately, while moving away from the cap may seem favorable for executives, it invites scrutiny regarding pay equity and banks' responsibilities amid economic fluctuations.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.