It strikes me that the European Commission’s and European Parliament’s preliminary agreement on limiting bonus payments in the financial services sector might be one big sticking plaster trying to cover a boil that needs serious lancing.
Anyone following the UK outcry at the proposed limits will think there are three primary schools of thought:
- It is about time overpaid bankers were banged to rights
- Bankers are now going to flee London and set up shop out East or West.
- This is exactly why the UK shouldn’t be in the European Union.
I don’t buy any of those points, but I do buy the point raised by the boys and girls in Brussels about corporate risk and the dangers of setting up a reward structure that allows, or even encourages, risk taking.
This under-the-bonnet, technical stuff is much tougher to solve than simply capping bonuses.
But our financial services organisations are getting their teeth into solving it, although it is going to be a long haul. Already banks (for example, retail versus investment) are being restructured.
As I pointed out in a blog earlier this year, there is also now an extremely high demand for reward and compensation professionals who are skilled in reward risk in financial services – to meet the new demands of the regulators.
So my real challenge is to those of us outside financial services (those of us who aren’t regulated): who is responsible for your corporate risks driven by poorly constructed bonuses and commission structures?
Don’t tell me you leave it to your sales directors or MDs?
What, like leaving the foxes in charge of the hen house!
HR and reward managers have the skills (or potential skills) to get more hands on with bonuses and performance targets that drive sustainable business behaviours.
The UK is light years behind the USA on this – so it is time to catch up and stop moaning about Europe’s rules when so many of us haven’t stepped up to the mark and are leaving our employers so exposed.
Agree or disagree? Please add your own insights – as always – in the comment section below.
Debi O’Donovan, editor, Employee Benefits