The chairman of Barclays is making an unlikely critic of bankers’ bonuses.
John McFarlane spoke at the annual conference of the British Bankers’ Association on Thursday night, and argued that bankers now earn too much.
“I used to run the markets side of various institutions and I was never paid anything close to anything people get paid in these areas now,” MacFarlane said.
In the speech, McFarlane, a former head of the Australia and New Zealand Banking Group, argued that bonuses encourage bankers to “cut corners.” This problem could be solved by creating “geared incentives in retail or investment banking” he said.
Despite his strong views, McFarlane said he doubted change will come any time soon. He expressed a belief that bankers should be given performance-based bonuses once it was clear what their work had acheived
“If I had my own way … I would reward people at the end, once you know the results sometimes three or five years down the road. At least you are then rewarding them for what you know in terms of the value they have created.” McFarlane added that he believes “this can never happen.”
During his speech, McFarlane was also keen to stress that regardless of the strength of his feelings about bonuses, Barclays won’t be able to act alone in changing the bonus culture in banking.
He warned that “all that happens is you lose your best people” if bonuses and pay are cut, adding “In order to motivate them we have to pay them,”
While McFarlane is pessimistic about changing the way in which bankers get bonuses, there is some evidence to suggest that the bonus culture is changing. In February, Barclays said it would cut its bonus pool by at least 16% to less than £2 billion ($US3.1 billion), and earlier this week Business Insider reported that major banks in the USA are setting aside less money for bonuses this year. Morgan Stanley is believed to have taken up to $US1 billion (£650 million) out of its remuneration pot.
After the conference, the Financial Times reports, McFarlane told reporters that “most of the returns at investment banks went to employees and not to shareholders and I think that game is over.”
McFarlane also jumped to the defence of former JPMorgan banker Jes Staley, who is tipped to become Barclays’ chief executive, after speculation that the appointment of an investment banker may lead the bank back to
MacFarlane said that people “jumped to conclusions” over the possible appointment, adding: “If we hire him, we’re not hiring an investment banker. He is not an investment banker. He started life like me, as a commercial banker, he is a corporate banker.”
“He then ran the equities division, but he didn’t trade equities. He ran the fund management division, and then ran the investment banking. He is a client guy, like I started life, lending money to corporations.”