When did this happen?

The FSA code, which will be published before the end of the year, will say that at least 40pc of bonuses should be deferred if the amounts are below £500,000, rising to 60pc if the bonus is above that figure. An early draft of the code, published in the summer, also said that at least 50pc of bonuses should be paid in shares with a minimum retention rule attached.

Non-bank financial services firms raised concerns when the FSA proposed the reforms

I understand (although disagree with) limits on bonuses for bankers.

But what\’s the justification for limits upon non-banking companies?

And what is the definition of a firm that is covered by these rules if it\’s not simply those who hold a banking licence?

Just as an example, it\’s entirely normal that salesmen of big ticket items are paid a base salary plus commission. And I\’ve certainly seen companies (and deals) in the computer industry where the commission is a multiple of annual salary. Are these now to be banned/must be in shares?

When did we get this mission creep?

3 thoughts on “When did this happen?”

  1. The qualifier is financial services companies. That’s why it has been “asset management firms and hedge funds” lobbying.

    This is unlikely to be mission creep and more likely to be ‘bank bonuses’ being media shorthand for a more comprehensive financial services industry regime.

  2. It certainly is objectionable if financial firms that take no banking risk and are not part of a banking group are affected by these rules. The problem for the FSA, though, is that investment banks, which are one of the intended targets, consist of bank and non-bank businesses. Thus for the bonus rules to have any impact, the FSA will need to have powers over non-bank financial businesses.

    I can’t say that this fills me with pleasure and I hope that fund managers and hedge funds are not affected by the rules.

  3. FFS.

    We pay salesmen commission so that they only earn big bucks when they bring sales into the business: and we only allow them to claim the commission once the first invoice has been paid.

    We don’t want to give them shares because if we issue shares to the salesmen, then the rest of us shareholders get diluted.

    Seriously, where do these morons think that the shares come from—do they think that they are conjured from thin air?

    If more shares are issued, then someone else is going to lose out—either someone will donate their shares, or more shares must be issued, ensuring that everyone else is diluted.

    Seriously, FFS.

    DK

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