GUEST COMMENT: You would be foolish not to keep an eye on what the EU’s saying about bonuses

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Michel Barnier

Michel Barnier, listening intently

Most people have now received their bonuses for 2011. If you are among them, compensation may not be at the forefront of your mind and you may be getting on with your role rather than monitoring events in the European Parliament.

This would be an oversight. Yesterday, some European lawmakers in the Parliament called for bankers’ bonuses to be capped at twice their basic pay.

As this Reuters article points out, this is the continuation of a process set in motion by EU financial services chief Michel Barnier, who has called for a specified ratio between banking salaries and bonuses.

Othmar Karas, an Austrian politician, is steering the measure through the European Parliament. And some, such as the Belgian Green Party member Philippe Lamberts, are calling for bonuses to be no higher than salaries.

Such calls may not represent mainstream opinion, but they are a reminder that the pay debate hasn’t gone away and that the trend fromEuropeis for more punitive restrictions on banking pay – not less.

In the event that the European Union legislates to specify the mix between fixed and variable compensation, we could find ourselves in a very different world. Right now, banks have to set their own internal ratios on variable vs. fixed compensation but there are no hard limits on an individual basis. If limits are imposed, it seems likely that fixed compensation – salaries – will rise again.

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