Wednesday, September 16, 2009
EU to call sanctions on excessive bank pay
At the G-20 summit, European Union leaders have come up with a draft to sanction banks for the excessive payment of bonuses for executives and traders. Because prior bonuses were not necessarily related to performance, banks were taking on more risk which helped lead to the current financial crisis. Additionally, the EU wants to enforce banks to disclose more information to the public. It will be interesting to see how this will affect all of the different countries within the EU.
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3 comments:
With the varying economies in the EU, regulation on bank pay will have altering effects. I agree that executives should not be guaranteed of bonuses, giving more incentive to take on risky projects and loans. If a company loses money then all bonuses should be forgone. The nature of an executive position should be heavily linked to yearly and long term performance.
I agree with Jake's comments. Currently the EU is compromised of 27 member states and I would imagine regulations on banking and other financial agents would have a varying effect. With the economy at such a fragile state, guaranteeing executives of bonuses is not the right avenue.
I agree that bonuses encourage a risk taking activity, which in some instances can be a good idea. However, most executives abuse it by taking excessive risks because of the likeliness of getting a bonus in any case. As a result, many companies failed, and these failures greatly contributed to current economic crisis. I think that the United States should seriously consider this important issue and enforce some actions as soon as possible.
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