"EU Lawmakers May Seek Ban on Bank Bonuses That Top Salary"

“We are looking at a set limit” on the size of bonuses compared to fixed salary, Othmar Karas, the lawmaker leading work on the rules, said at a meeting of the body’s economic and monetary affairs committee. This limit should be set at “100 percent, so one-to-one,” he said today.


So, base salaries are probably going to go up? This is great!

Personal andecdote: Turns out a chunk of my 2011 bonus is vesting over the next few years. If the same thing happens for the next couple of years, I’ll have bonus chunks from multiple years vesting at one. Since the vesting is contingent on staying with the firm, for me (assuming no change in compensation), this would be equivalent to about 40% increase in fixed compensation. For more senior people with higher % bonus, the effect will be even more pronounced. So this increase in salary is already happening in some form.

You’re right. If they cap bonuses and tie them to salaries, then salaries will probaly go up. Congrats on the vesting.

I would prefer to get the money right away… but thanks. That example was to illustrate how bonuses are being integrated into fixed payments, not to celebrate that I got a bonus. But upon reflection, it does come across a bit as the latter…

I would think that they should just confine themselves to cases where someone’s total comp is like 1mn euros or more.

I’m not sure I understand what Ohai was saying about deferred bonuses becoming fixed compensation. My understanding of it is that it is still a bonus even if it is deferred. If this has the policy of reducing the amount of deferred compensation in exchange for immediate increases in salaries, then that’s a negative thing. Bank bonuses should timed in relation to the value of that group’s assets and should be clawed back when the performance subsequently sucks.

If I stay at the firm for one more year, I get (for example) $100k for sure. That sounds a lot like salary.

Consider these two statements:

  1. Your $100k bonus vests over the following year.

  2. You got a $100k salary increase for the following year.

It’s the same.

Are politicians really clueless enough to think that a rule like this would do anything at all?

We all know that companies would just adjust base salaries to compensate for the new rule.