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PAYSLIPS UNDER THE MICROSCOPE
There has been a lot of focus on pay of late. Here in the UK, there have been small scale pay revolts at Anglo and BP, the later focusing on the reported £14m pay package for CEO Bob Dudley. Last week was HSBC's turn. HSBC, unlike others, effectively yielded to investors and stakeholders and adjusted the pay levels of senior execs downwards, in some cases by some 7%. One measure often used is the ratio of CEO compensation to average salary, where HSBC's CEO comes out over 150x worker salary with a total package of nearly $10 million. I recently collected from Bloomberg and Morningstar US BHC total compensation levels for CEOs as part of some research, and it was, well interesting. The top seven US BHCs in 2015 (excluding investment banking pure plays like Goldman and MS) come in at an average over $16 million each, so perhaps Gulliver's comp isn't really all the high given scale of the operation he is running. My numbers suggest for 2014, where numbers are last available for nearly all the largest 150 US BHCs, the average was just under $5m. This makes HSBC's CEO package before the write down appear to me to be more than fair by comparison. However, just this past week, US regulators are now pushing for deferring half of bonus on Wall Street up for 4-years. See http://www.wsj.com/articles/new-rules-curbing-wall-street-pay-announced-1461247600 for more information on this development.
Probably more to the point on pay, is the use of clawbacks, where most or all of paid compensation must be repaid when and if the bank discovers the original award was inappropriate in light of subsequent findings about a transaction or misconduct. Misconduct is a difficult standard to prove, as some are finding out. However, banking chiefs are facing extraordinary pressures to play a game of banking twister, preserve capital levels, reduce the balance sheet usage, jettison capital intensive businesses and improve risk conduct and culture. I cannot see how clawbacks will not be an increasingly used mechanism by bank chieftains given these pressure points in today's banking environment.
Probably more to the point on pay, is the use of clawbacks, where most or all of paid compensation must be repaid when and if the bank discovers the original award was inappropriate in light of subsequent findings about a transaction or misconduct. Misconduct is a difficult standard to prove, as some are finding out. However, banking chiefs are facing extraordinary pressures to play a game of banking twister, preserve capital levels, reduce the balance sheet usage, jettison capital intensive businesses and improve risk conduct and culture. I cannot see how clawbacks will not be an increasingly used mechanism by bank chieftains given these pressure points in today's banking environment.
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