Executives from French financial institutions agreed today to a deferred payment scheme for bankers meant to create incentives for long term health instead of short term gains. And now it looks like France may try to force banks based in other countries to adopt the same plan.
French President Nicolas Sarkozy said today that France will not give any business to banks that refuse to adopt the compensation limits.
“From now on, France will give no mandates to banks that don’t apply these rules,” Sarkozy said after meeting with French bank executives in Paris.
The new French limits defer two thirds of bonus payments for three years and require that a third of a bonus be paid in stock. New hires will no longer get guaranteed payouts.
It’s quite a creative way for Sarkozy to persuade banks to curb compensation. Unfortunately, much of the drive behind the urge to reform pay depends on the mistaken view that banker bonuses played a significant role in bringing the financial system to a crashing halt. There’s not much evidence for that proposition, and a lot to suggest it’s just plain wrong. It wasn’t bad incentives that brought losses onto banks, it was mistakes about the value of assets.
So who is likely to get clobbered by the new French rule? Well, if your bank does a significant amount of business with the government of France, it could be you getting clobbered.
Bloomberg lists a bunch of banks who do business with France: Barclays Plc, HSBC Holdings Plc, BNP Paribas, Credit Suisse Group AG, Societe Generale, JPMorgan Chase & Co., Merrill Lynch & Co., Nomura Holdings Inc. and Royal Bank of Scotland Group.
Notably, Goldman Sachs isn’t on the list. So, once again, Goldman guys are going to get paid more than you.
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