More on bonuses

There's a decent piece by Patrick Hosking in The Times taking a look at different approaches to controlling bonuses and how likely they are to result in change. Notably he suggests that the FSA's intervention is likely to be the most effective.

Here's what he says about shareholder activism on pay:

Collective action by shareholders has been timid. One wonders how sincere the institutional investors are about reforming banker pay. Many of the biggest fund management groups are owned by banks; almost all of them are beneficiaries of the same flawed bonus system — one that rewards short-term success and buys into the notion that financiers are hugely talented.

Shareholders should be the solution to the bonus problem. In fact they are self-serving agents who have become part of the problem.

Interestingly the book I blogged about recently makes the same point. If the fund management industry pays highly, how likely is it to rock the boat.

In practice I suspect that individual who could make a difference don't deliberately take a soft line on remuneration because they want to protect their own income. But I reckon it must be hard to take a challenging line on such issues as it may well be seen - or the individual may fear it will be seen - as an attack on City culture. I think there remains a deep cultural antipathy towards governance activism in institutions as a whole. The corp gov people might be very sincere, but the organisation doesn't buy it.