Clegg’s five-point plan to end unfair bonuses
By Sabine Klensch
Nick Clegg and Vince Cable unveiled a five-point plan to end the bonus culture at failing banks this morning.
The two men also attacked bank bonuses as being symbolic of the culture of greed and excess that dominated the City.
Mr Clegg said his party would regulate against excessive bonuses, so that loss-making banks are prevented from rewarding employees.
“I make no apologies for the fact this will mean big changes in the City of London. I want to see a change as fundamental as the Big Bang of the 1980s, for the better, not the worse ,” he said.
“Bankers must understand that after the billions pumped into the banking sector there can be no financial or moral justifications for the obscene bonuses which are still being paid out.”
The Lib Dem proposals include:
No cash bonuses – Bonuses in excess of £2,500 would have to be paid in shares and these would only be redeemable after five years. If share holders try to redeem these shares before the five years are over, they would lose the right to own them and shares would be returned to the company.
No bonuses at board level – board directors can be well paid, yet they should have the “long term interest of a company at heart, which is not compatible with bonus payments,” Mr Clegg said.
No rewards for failure – the Lib Dems want to extend the Financial Services Act to ensure that no regulated institutions that have incurred losses can pay discretionary bonuses.
Total transparency – all bank staff that have salaries and bonuses greater than the prime miniter’s salary (currently around £150,000) would have to be published with the Financial Services Authority (FSA) making its assessment of all regulated firms remuneration policy publicly available.
Holding directors to account – the FSA would be given the authority to ensure that directors of banks are personally fined if their institution breaks the current code of practice for remuneration.
Lib Dem treasury spokesman Vince Cable highlighted the party’s focus on the aftermath of the “still-ongoing major economic crisis”, saying: “Bank bonuses are underwritten by taxpayers, and we need to fix this pollution caused by the banking industry implementing the right regulations.”
Nick Clegg added: “Banks have one vested interest which holds the rest of the economy hostage and billions of bailout money withdraws capital from the real economy. This is not the entire financial sector but a handful of banking institutions are doing business at the cost of others.”
Mr Clegg also said there was no evidence to support the claim that such policies would lead to an exodus of the financial services industry to tax havens such as Switzerland.
“I want to see fundamental reform to Britain’s banks. Only by transforming the banking industry from top to toe can we start to build a new economy,” he added.
The move comes on the same day the Conservative manifesto is unveiled and a day after Labour revealed its set of policies going into the election.
“Labour and the Conservatives refuse to take action to make the economy safe. Labour said next to nothing about reforming the UK banking system in its manifesto yesterday, and the Conservatives are expected to do even less at their manifesto launch today.”