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  1. Wealth
February 28, 2013

EU banker bonus curb needn't be the death of the City

By Spear's

Andre Spicer reminds us that large cash bonuses are a poor way to reward complex tasks and that they can, in fact, make people perform worse

Howls are emanating around the City after news that the EU is curbing bankers’ bonuses at one times salary (twice with shareholder approval). On the surface, the move looks to be the death knell to London’s leading profession, meaning Britain’s best will up sticks for Singapore or New York, but, for all the hyperbole, there may well be surprising spinoffs.

Andre Spicer, Cass Business School’s Professor of Organisational Behaviour, reminds us that large cash bonuses are a poor way to reward complex tasks and that they can, in fact, make people perform worse. Therefore, the new curb could mean better decisions being made by Britain’s banks which, incidentally, haven’t had the best record of late, as proven by RBS announcing a pre-tax loss for 2012 of £5.16 billion only this morning.

Read more about bankers’ bonuses from Spear’s

Indeed, commenting further, Professor Spicer says that the positives of the EU’s bonus policy may extend from bank to banker. Soft incentives will come to the fore in the battle to retain top talent, meaning better working hours, more supportive work environments and a wider range of training opportunities.

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‘This could lead to workplaces where bankers are no longer willing to put up with 364 days of stressful work and one good day when bonuses are paid. This will mean banking is likely to be a more attractive job for a wider range of people.’

While London mayor Boris Johnson has just said, ‘This is possibly the most deluded measure to come from Europe since Diocletian tried to fix the price of groceries across the Roman Empire,’ perhaps it’s not the death knell after all.

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