Will EU burst the 'Bonus Bubble'?

[Hairless Kitten II]

The current head of the European Union called on Thursday for G20 countries to cap bankers' rewards and end the "bonus bubble", as EU leaders sought to spur Barack Obama into action.

"I think we need a cap for the bonuses, as part of your income, or part of the revenue of the company you are working (for) or part of the income of that company," Swedish Prime Minister Fredrik Reinfeldt said on his arrival at the summit.

"I hope to see a European agreement on this," he added. "We of course know that (the) United states is very often against this idea. It's not the only regulation that needs to be done."

Reinfeldt also stressed the need for exit strategies, saying "the foundation for the financial crisis was highly indebted people -- the solution cannot be highly indebted countries."

He added: "We'll discuss the return of the bonus culture in the financial sector that annoys a lot of people, we need to deliver on this.
"It's time to say: enough is enough. I hope that tonight we can say that the bonus bubble has burst."

British Prime Minister Gordon Brown was the first of the major countries' leaders to arrive for the working dinner aimed at preparing next week's summit of the world's major and emerging economies in Pittsburgh, Pennsylvania.

With Brussels also seeking to pressure Obama into extra funding for the fight against global warming, diplomats say Brown could find Britain out of synch on each of the issues of bonus caps, specific climate funding targets and exit strategy design.

The EU also wants the United States to pump extra money into the battle to tame climate change ahead of United Nations talks in Copenhagen in December that will try to drag global coordination on the issue out of a stifling quicksand.

Reinfeldt added: "It's time for a wake-up call to world leaders on climate. We really need to step up, (and) start delivering action."
Diplomatic sources said that Britain was in the opposite camp from France, Germany and others.

The Europeans were gathering in the interests of "persuading our American friends that a new code of (financial) conduct must be introduced," according to senior European finance minister Jean-Claude Juncker.

Luxembourg Prime Minister and Eurogroup head Juncker said Europe should act on bonuses "whether the Americans are with us or not... the Americans will not be able to sit on the sidelines."

A top US presidential aide has already ruled out fixed caps on bonuses ahead of the world's major economies and developing nations meeting in the United States on September 24 and 25.

After Obama lashed out at top Wall Street executives this week, a summit declaration in Brussels will seek to put the onus firmly on the White House to match the US president's words with action.

However, Mike Froman, US deputy national security advisor for international economic affairs, said Obama "has been reluctant to... set individual compensation levels."

A draft European Union summit statement seeking "binding rules" calls for handouts to be tied to "long-term performance" and an end to guaranteed bonuses.

It says financial police should be given powers to slash payments retrospectively and force boardrooms to control high-risk speculation.
Europe also wants to freeze stock options for set periods and expose top directors to penalties.

Politicians fear a backlash from taxpayers angered by bankers' use of massive injections of public money.

Three US banks that were massive recipients of bailout funding, Goldman Sachs, Morgan Stanley and JP Morgan, each paid out billions of dollars more than they even earned in 2008 bonuses, according to a report from the New York attorney general's office.

The summit draft says that the developing world will need 100 billion euros per year by 2020 to tackle climate change.

France and Germany as well as some of the eastern nations including the Czech Republic, Hungary and Italy are reluctant to fix bloc-wide aid targets before they have even been discussed.

The UN climate negotiations are proving "difficult," according to US climate envoy Todd Stern as high-stakes talks got underway in Washington, with Britain's Foreign Secretary David Miliband invoking a "real danger" of failure in Copenhagen.

http://news.yahoo.com/s/afp/20090917/bs ... nkingbonus

A year ago, I had a topic about this issue on the old Jolt forum. Many people said that it never will happen: well, big mistake!

This is a very good thing. This is not about your wallet, due you probably will never reach the ranks of the top CEO's.

[Gauntleted Fist]

Why the Hell is it all italicized?

Unnecessarily straining my eyes trying to read it.

[Lacadaemon]

Yeah, look they'll just put their salaries up and forgo the bonuses. They'll still lard it up though. No politician will ever be serious about reducing the compensation for bankers because the politicians depend upon that money just as much as the bankers do. Just ask Tony Blair.

Anyway, something has to be done with that wall of money that gets swept into the capital markets everyday. God forbid it was put to use, there would be all sorts of problems: like a rising standard of living or someshit.

[Hairless Kitten II]

Why the Hell is it all italicized?

Unnecessarily straining my eyes trying to read it.

It is not all italicized, but most in this case.

Why? To make clear what's quoted and what's my own opinion.

Solution: click the link.

[Gauntleted Fist]

It is not all italicized, but most in this case.

Why? To make clear what's quoted and what's my own opinion.

Why not just use the quote tags? That's what they are there for.

Solution: click the link.

I did.

[NotnotgnimmiJymmiJ]

It would be better to have a 2 tier regulatory structure. At one level, large banks wouldn't be able to take huge risks and put the system in danger. On the second level have smaller hedge funds and other institutions with less regulation where they can give whatever ridiculous bonuses they want to and invest in whatever they want to.

[The Alma Mater]

What was that rule again ? If you earn over 7x the salary of your direct subordinates, your company has an unhealthy reward structure ?

IIRC, well over 100x is quite common in the USA. So I doubt they will listen.

[Blouman Empire]

Didn't know bonuses were tradable commodities.

[Hairless Kitten II]

It would be better to have a 2 tier regulatory structure. At one level, large banks wouldn't be able to take huge risks and put the system in danger. On the second level have smaller hedge funds and other institutions with less regulation where they can give whatever ridiculous bonuses they want to and invest in whatever they want to.

The current bonus system is partly the reason why the system collapsed, so they will fix it.

Less regulation? That's another reason why we are in a crisis. The bank world needs an authority like FDA to check every new financial product.

[Hairless Kitten II]

What was that rule again ? If you earn over 7x the salary of your direct subordinates, your company has an unhealthy reward structure ?

IIRC, well over 100x is quite common in the USA. So I doubt they will listen.

It's not a matter if they will listen. They are working on laws to get the job done, both in Europe AND USA.

[RoI3]

No, they'll fail... again

[Al Barakesh]

Damn EU interfering outside Europe again

[Pope Joan]

What was that rule again ? If you earn over 7x the salary of your direct subordinates, your company has an unheapay lthy reward structure ?

IIRC, well over 100x is quite common in the USA. So I doubt they will listen.

That 7x was Ben and Jerry's!

But, like the rest of the country, they sold out.

I am tired of the argument that these oceans of money are fair pay for services rendered. No amount of effort or talent is worth that much.

I'd like to measure pay in "presidents". How many times the president's salary do you make? the CEO of Coca Cola made $17 million one year. That more than 40x the president. Ridiculous, it's impossible to produce that much value.

[Hairless Kitten II]

Damn EU interfering outside Europe again

The current world crisis is having its roots not in Europe. Be glad that Europe will clean the shit of another.

[Greed and Death]

This is silly unless the government bought the banks (during the bailout) then it has no right dictating salary caps.

[The Alma Mater]

This is silly unless the government bought the banks (during the bailout) then it has no right dictating salary caps.

Why not ? It can dictate minimal wages as well.

[Hairless Kitten II]

What was that rule again ? If you earn over 7x the salary of your direct subordinates, your company has an unheapay lthy reward structure ?

IIRC, well over 100x is quite common in the USA. So I doubt they will listen.

That 7x was Ben and Jerry's!

But, like the rest of the country, they sold out.

I am tired of the argument that these oceans of money are fair pay for services rendered. No amount of effort or talent is worth that much.

I'd like to measure pay in "presidents". How many times the president's salary do you make? the CEO of Coca Cola made $17 million one year. That more than 40x the president. Ridiculous, it's impossible to produce that much value.

I agree. And a president is elected, a CEO isn't. The top executives salary scheme is a disgusting scheme of nepotism and nobility.

A CEO doesn't pass a HR manager before he is hired. The member of the board is deciding which CEO will have the salary and bonus he will get.

And that’s already one weak issue in the system.

The CEO of company X is often member of the board in company Y. And the CEO and other top executives of company Y are member of the board in company X. It’s like: “You cover my ass and I will cover yours”

[Hairless Kitten II]

This is silly unless the government bought the banks (during the bailout) then it has no right dictating salary caps.

It's rather easy to work out: just put a taxation of 100% above a specific salary.

You have a minimum speed limit on highways in my country, but a maximum as well.

[Greed and Death]

This is silly unless the government bought the banks (during the bailout) then it has no right dictating salary caps.

Why not ? It can dictate minimal wages as well.

Even for the self employed or independent contractors ?


A maximum wage law is one unenforceable as the CEOs will simply demand payment in stocks (which the companies will buy back at a set price) or register themselves as independent contractors and consultants to get around the law.

This would also see a larger number of CEO's moving the businesses overseas to avoid the pay regulation.
which on top of getting around any US pay regulation would see a large amount of revenue lost by the US.

[Greed and Death]

This is silly unless the government bought the banks (during the bailout) then it has no right dictating salary caps.

It's rather easy to work out: just put a taxation of 100% above a specific salary.

You have a minimum speed limit on highways in my country, but a maximum as well.

and said CEO moves bank head quarters over seas to avoid the regulation.
net loss of revenue and capital.
though a net benefit for the 3rd world I suppose.

[Hairless Kitten II]

This is silly unless the government bought the banks (during the bailout) then it has no right dictating salary caps.

Why not ? It can dictate minimal wages as well.

Even for the self employed or independent contractors ?


A maximum wage law is one unenforceable as the CEOs will simply demand payment in stocks (which the companies will buy back at a set price) or register themselves as independent contractors and consultants to get around the law.

This would also see a larger number of CEO's moving the businesses overseas to avoid the pay regulation.
which on top of getting around any US pay regulation would see a large amount of revenue lost by the US.

Most CEOs are already contractors. I'm sure that the EU and USA government know this too and will block all kind of exits.

This topic will be discussed at the G20 meeting next week.

[Pope Joan]

What was that rule again ? If you earn over 7x the salary of your direct subordinates, your company has an unheapay lthy reward structure ?

IIRC, well over 100x is quite common in the USA. So I doubt they will listen.

That 7x was Ben and Jerry's!

But, like the rest of the country, they sold out.

I am tired of the argument that these oceans of money are fair pay for services rendered. No amount of effort or talent is worth that much.

I'd like to measure pay in "presidents". How many times the president's salary do you make? the CEO of Coca Cola made $17 million one year. That more than 40x the president. Ridiculous, it's impossible to produce that much value.

I agree. And a president is elected, a CEO isn't. The top executives salary scheme is a disgusting scheme of nepotism and nobility.

A CEO doesn't pass a HR manager before he is hired. The member of the board is deciding which CEO will have the salary and bonus he will get.

And that’s already one weak issue in the system.

The CEO of company X is often member of the board in company Y. And the CEO and other top executives of company Y are member of the board in company X. It’s like: “You cover my ass and I will cover yours”

Exactly! The system is not based upon merit or productivity.

It is based upon board members looking out for each other's interests, and the individual stockholders be damned.

Owners should control the abuse, but many purported "owners" are just funds and other corporations, all part of the back-scratching system.

[Hairless Kitten II]

This is silly unless the government bought the banks (during the bailout) then it has no right dictating salary caps.

It's rather easy to work out: just put a taxation of 100% above a specific salary.

You have a minimum speed limit on highways in my country, but a maximum as well.

and said CEO moves bank head quarters over seas to avoid the regulation.
net loss of revenue and capital.
though a net benefit for the 3rd world I suppose.

3rd world? Nah, will not happen. Today, they already use offshore techniques to avoid taxation. Like I said, governments know this too and will work out proper solutions.

[Greed and Death]

This is silly unless the government bought the banks (during the bailout) then it has no right dictating salary caps.

It's rather easy to work out: just put a taxation of 100% above a specific salary.

You have a minimum speed limit on highways in my country, but a maximum as well.

and said CEO moves bank head quarters over seas to avoid the regulation.
net loss of revenue and capital.
though a net benefit for the 3rd world I suppose.

3rd world? Nah, will not happen. Today, they already use all kind of offshore techniques to avoid taxation. Like I said, governments know this too and will work out proper solutions.

Yes because offshore tax havens have been eliminated.

[Hairless Kitten II]

This is silly unless the government bought the banks (during the bailout) then it has no right dictating salary caps.

It's rather easy to work out: just put a taxation of 100% above a specific salary.

You have a minimum speed limit on highways in my country, but a maximum as well.

and said CEO moves bank head quarters over seas to avoid the regulation.
net loss of revenue and capital.
though a net benefit for the 3rd world I suppose.

3rd world? Nah, will not happen. Today, they already use all kind of offshore techniques to avoid taxation. Like I said, governments know this too and will work out proper solutions.

Yes because offshore tax havens have been eliminated.

Really? A Bahamas, Barbados or even Jersey is still rather popular among CEO's. They are certainly not eliminated (yet).