Budding bankers expecting the bumper bonuses of years gone by will have to think again, with only the top performers likely to be paid top dollar.

Business leaders and bankers at the annual Davos forum were largely dismissive of attempts to cap or restrict compensation in the financial services industry through regulation. But they said a combination of public anger, tighter scrutiny from watchdogs, tougher performance measures and a structural fall in profitability in banking in the post-crisis world would curb the excesses of the past.

"Compared to four years ago its night and day, partially because the regulators are insisting on it...and partly because the supervisory board of banks have said we have got to balance the reward of our senior team with the reward of our long-term shareholders. And part of it is the business model has changed," a senior investment banker at a major Wall Street firm said.

Part nationalized Royal Bank of Scotland, for example, said on Saturday that Chairman Philip Hampton would not pick up a share-based bonus, amid a backdrop of public anger over a 1 million ($1.6 million) stock bonus for its chief executive.
Compensation consultants estimate bonuses for 2011 fell by about 30 percent in 2011, with payouts dropping across major banks such as Goldman Sachs and Morgan Stanley.

Year-end bonuses at Barclays Plc's investment bank are expected to be down about 30 percent this year, on average, a source familiar with the matter said on Thursday.

"Of course bonuses are falling, so is profitability," a senior European banker told Reuters on the sidelines of the conference on Saturday, following a meeting on the future of financial services involving top bankers and regulators.
Several business leaders, speaking candidly during closed meetings, pointed to growing social inequality and said there was a need for more effective tax collection from the best paid.

And while critical of regulatory efforts to cap executive remuneration, some blamed overly generous compensation packages on a lack of shareholder engagement in the issue.

"It should be up to the boards, not the regulators. Where are the shareholders of these banks?" the head of one investment bank told Reuters. Like others who spoke about the issue, he declined to be named.

A speaker on a panel on compensation at the World Economic Forum meeting in the Swiss Alps said: "Institutional investors are not that interested because the amount of money that is involved is totally immaterial." When asked for a show of hands on whether executive compensation should be regulated, nobody in the audience of nearly 100 people raised their hand.

The investment banking head said part of the problem was that many bankers had come to believe that they alone were responsible for the profits generated in their business, rather than the role which they fulfilled.

The Daily Independent/Bangladesh/ 30th Jan 2012