Bonuses Threatened

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The European Union is showing that it cannot act according to reason and logic, but bows down to popular opinion.  The European parliament has been pushing to get control over the pay of bankers and there has finally been an agreement on how to do this.  This agreement still has to be signed off by the EU finance ministers, but from the popular distaste towards bankers, it does not seem like it would face much opposition.  If it goes through Banker’s bonuses would be capped at %100 of their salaries and if the shareholders vote and agree the bonuses could be up to %200.  This invasion in private business is unacceptable.  This should be a wake up call for the people of Europe.  It is too costly to make decisions that effect the economy based on feelings and not on reason. This cap on salaries will cause the European banks to struggle in competing for the best employees. Banks from America and Asia will have the advantage. This by itself should be reason to allow bankers to get payed based on the market for their skills, but there is more. The lower bonuses would mean that banks have to pay higher fixed salaries which weakens the connection between pay and performance. This would undermine other efforts to make bankers “more responsible”. The European Government needs to stop playing with the economy and learn what a free market means.

Written by: Toma Karamanolev

Source: http://www.economist.com/blogs/schumpeter/2013/02/europes-decision-bankers-pay

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