British Treasury head Alistair Darling said today that annual bonuses for bank executives will be outlawed.
“We won’t allow greed and recklessness to ever again endanger the whole global economy and the lives of millions of people,” Darling said.
Business Week’s David Stringer explains that Darling’s move is an attempt to curb what European politicians regard excessive risk-taking in the huge financial sector.
Darling, who was delivering a speech at the Labour Party’s annual conference, said that that new legislation to restrict how the payments are made will be introduced in Parliament within weeks. He said bankers in Britain will in the future be offered bonuses for their performance over several years.
Whatever might be said in favour of restructuring compensation on Wall Street, there’s simply no evidence that executive compensation encouraged recklessness or caused the financial crisis. Likewise, there’s little to suggest that restricting pay will avoid future financial disasters. But this hasn’t stopped politicians, particularly in Europe, from focusing on the issue of banker pay.