This week ahas exposed yet another example of the Tories talking tough but doing nothing when it comes to reforming the financial system and taking action on bankers’ pay.
Arlene McCarthy MEP is Labour’s European spokesperson on economic and financial affairs
This week a European Parliament vote has exposed yet another example of the Conservative Party talking tough but doing nothing when it comes to reforming the financial system and taking action on bankers’ pay.
The out of control pay culture in banks was a key factor in the reckless behaviour which led to the crisis. Last year I steered through tough new laws to change the way bonuses are paid, linking them to longer term performance, not short-term reckless profit chasing.
Those rules are now being put in place. More must be done to enable shareholders to hold the senior management of their companies to account, and bring down the obscene overall level of pay in this sector.
Transparency is key to this and Euro MPs now have the opportunity to take forward plans to make banks more open about their pay deals. The Conservative-led government claims to want more openness.
The previous Labour government legislated to require banks to declare how many high earners they have on their books; the new government shelved this legislation but when challenged by Ed Miliband at Prime Minister’s Questions David Cameron said (Hansard, November 24, 2010; column 261):
“David Walker [author of a UK review into corporate governance in banks and financial institutions] has carried out that review and made his report.
“He has made it very clear that he thinks we should make progress with the transparency agenda at the same time as other European countries. That is a view we think should be taken into account.”
So why then did Ashley Fox, Conservative Euro MP drafting the European Parliament’s position on new EU rules on corporate governance in the financial sector, fail to put forward a singe proposal to address the out of control pay culture?
Do the Conservatives think that the massive amounts spent on bankers’ pay is not of concern to shareholders or the public?
If Conservatives are committed to reform and starting a campaign for this in Europe, why was it left to Labour Euro MPs to table proposals on transparent pay? We put forward requirements for financial institutions to publicly declare how many people earn more than €500,000 (£435,000) per year, with a breakdown by bands of €500,000, reinstating at EU level the rules the ConDems shelved in government.
And how did Ashley Fox respond to our amendments?
He manoeuvred behind the scenes to double this threshold, raising the €500,000 limit to a million, making sure that thousands of the Tories’ friends in the City would not be covered by these transparency rules.
Last year we saw the government make tough pronouncements in the media about acting on bonuses, while at the same time attempting to water down proposals when out of the public eye. Now once again we’ve seen tough talk from the coalition, but no action.
Yet again it shows only Labour can be trusted to fight for transparency on bankers’ pay.
To reach hundreds of thousands of new readers and to make the biggest impact we can in the next general election, we need to grow our donor base substantially.
That's why in 2024, we are seeking to generate 150 additional regular donors to support Left Foot Forward's work.
We still need another 124 people to donate to hit the target. You can help. Donate today.
15 Responses to “Tories fail to shine a light on City pay”
Come on Arlene!
Arlene, even you know that this is complete nonsense and anybody who actually reads the report can see that there was plenty in there about remuneration. Furthermore, the point about 1 million Euros was clearly only changed to bring it into line with YOUR report on CRD. Below is the section of your report and the relevant sections of the Fox report.
CRD III (the McCarthy report) states;
Article 22, paragraph 5, Home Member State competent authorities shall collect information on the number of individuals per credit institution in pay brackets of at least EUR 1 million including the business area involved and the main elements of salary, bonus, long-term award and pension contribution. That information shall be forwarded to EBA, which shall disclose it on an aggregate home Member State basis in a common reporting format.
Fox report section on Remuneration:
47. Believes that remuneration policies must be based on the long-term performance of the individual and their firm to ensure remuneration policies do not contribute to excessive risk-taking, and that remuneration policies or payments should never undermine the stability of a firm;
48. Welcomes the changes to remuneration policy that have already been introduced by financial institutions, whereby bonuses are linked to the long-term success of the business and only paid out after three years at the earliest; also welcomes the fact that it is possible to demand repayment of bonuses if economic objectives have not been met;
49. Stresses that all share options must be properly disclosed and have vesting periods of at least three years; considers that greater use should be made of contingent capital instruments rather than shares, as they have less conflict of interest in inducing short termism;
50. Notes that the issue of remuneration in financial institutions has been dealt with in CRD III;
51. Stresses the importance of a strict remuneration policy as foreseen in the Capital Requirements Directive (CRD III) and Solvency II; expects these and other existing legislative measures to be rapidly implemented from January 2011; calls upon the Commission to publish an evaluation report in 2014;
52. Acknowledges that structural approaches differ among Member States; encourages practices which strengthen corporate governance according to the legal form, size, nature, complexity and business model of the financial institution;
53. Notes that the application of existing recommendations for the remuneration of directors of listed companies is neither uniform nor satisfactory; calls therefore on the Commission to come forward with legislation at EU level on remuneration for directors of listed companies in order to ensure that the structure of remuneration in listed companies does not encourage excessive risk-taking, as well as to ensure a level playing field in the EU;
54. Highlights in particular concerns that shareholders cannot and do not currently exercise due control over remuneration policies in financial institutions;
55. Insists that full transparency is necessary for shareholders to be able to conduct proper oversight of remuneration policies, and calls in particular for the publication of the number of staff in each institution receiving total remuneration greater than EUR 500 000 (1m), in bands of at least EUR 500 000 (1m);
56. Is of the opinion that shareholders should help determine sustainable remuneration policies and should be given the opportunity to express their views on the remuneration policies, with the right to reject the remuneration policy defined by the remuneration committee at the general meeting;
Mike Thomas
An MEP taking on the bankers over salaries and expenses? You couldn’t make this up.
One group of people are paid fabulously well for talent and skills in short supply. The other group are corrupt and have not had their accounts signed off for 15 years.
Anon E Mouse
This woman was in a party that rewarded bankers with knighthoods and gave them free reign in the marketplace to the detriment of individuals in our county.
This woman is an outrageous hypocrite who should hang her head in shame.
Labour need to get a grip and start monitoring what gets published and when and stop this tribal drivel ASAP.
Shameful article…
Sean
Lehman’s had one of the highest employee share ownership rates out of the bulge bracket ibanks. Dick Fuld had over $500m alone.
AIGFP, the unit that nearly brought down one of the largest financial players, had this long-term employee equity including it’s boss Joe Cassano having around $100m in shares.
Hedge funds are patnerships with a lot of individual wealth tied in performance. Same with private equity.
Do you honestly believe that this will change behaviour, or are you so desperate to be seen to do something that you are promoting this?
scandalousbill
Come on Arlene,
The OP by Arlene noted that while there has been plenty of tough talk, the watering down occurred when it came to policy delivery…
While your response clearly demonstrates the former, what legislation, proposed or enacted, can you point us to, that demonstrates that any policy or legislation has implemented the points you highlight?