Bonus culture change may just make the rich richer

Fri Jun 5, 2009 4:03am EDT
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By Jane Merriman

LONDON (Reuters Life!) - Regulators and politicians who want to curb the huge bonuses paid to financiers in the wake of the global credit crisis may find the banking sector's response even more unpalatable.

More money for the highest flyers and less for the rest.

Investment banks that have survived the crisis have had a bumper start to 2009, which could put bonuses on the rise again even while banks, recruiters and compensation experts cast around for other ways to motivate the money makers.

Compensation consultant Johnson Associates Inc has already predicted bonuses may rise 20 percent to 30 percent in some areas of investment banking this year.

A few banks are actively hiring and offering staff juicy packages which can include guaranteed bonuses.

So attempts to "regulate" bonuses or keep a lid on them could struggle as the financial services industry picks itself up and moves on.

The multimillion dollar bonus culture of investment banks has been blamed for contributing to the risky behavior which brought about the near-collapse of the world financial system.

Britain's finance watchdog said in March: "Although it is hard to prove a direct causal link, there is widespread consensus that remuneration practices may have been a contributory factor to the market crisis."   Continued...