Is this the end of bonus culture?

The punishment, finally, has come.

Finally the punishment has come. After years of banker bashing, public rage and political incredulity, bankers, it seems, are ultimately being hit where it hurts – their bonuses.

The bonus cap, announced on Wednesday, comes not from the UK Government, but the EU, who seemed very pleased with the result: Othmar Karas, the European Parliament’s negotiator said: “For the first time in the history of EU financial market regulation, we will cap bankers’ bonuses”.

But banking is only one half of the story. The excessive bonus culture, inherited from the 80s, has permeated just about every financial trading institution. Hedge funds, those opaque offices of Mayfair that have given us vocabulary like “futures” and “swaps”, are also likely to have their bonuses capped. Other traders could also see regulation: asset managers, investment managers, fund managers; the list goes on. So is this the end of bonus culture?   

Probably not, no. Although financial institutions threaten to go abroad, the list of regulatory-friendly destinations is getting smaller by the day. No, it is much easier just to bypass the rules. The obvious solution is simply to raise salaries – the norm method of gaining more pay before bonuses. An increased salary will also see bigger bonuses as the EU proposed cap is fixed to salaries at a ratio of 1:1 (or 2:1 with shareholder approval).

Long term bonuses-type rewards will also be exempt from the cap. Rather than receiving the usual Christmas bonus, bankers can earn a quarter of their salary through instruments deferred for five years. Other complex structures and financial vehicles will be set up to fall outside EU powers and confound Brussels policy makers. 

Like smoking, financial institutions seem unable to quite their bonuses. Discouraged by Government, banned from public places and shamed by society, bonus baiting goes on.

Photograph: Getty Images

Oliver Williams is an analyst at WealthInsight and writes for VRL Financial News

Photo: Getty
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Theresa May is paying the price for mismanaging Boris Johnson

The Foreign Secretary's bruised ego may end up destroying Theresa May. 

And to think that Theresa May scheduled her big speech for this Friday to make sure that Conservative party conference wouldn’t be dominated by the matter of Brexit. Now, thanks to Boris Johnson, it won’t just be her conference, but Labour’s, which is overshadowed by Brexit in general and Tory in-fighting in particular. (One imagines that the Labour leadership will find a way to cope somehow.)

May is paying the price for mismanaging Johnson during her period of political hegemony after she became leader. After he was betrayed by Michael Gove and lacking any particular faction in the parliamentary party, she brought him back from the brink of political death by making him Foreign Secretary, but also used her strength and his weakness to shrink his empire.

The Foreign Office had its responsibility for negotiating Brexit hived off to the newly-created Department for Exiting the European Union (Dexeu) and for navigating post-Brexit trade deals to the Department of International Trade. Johnson was given control of one of the great offices of state, but with no responsibility at all for the greatest foreign policy challenge since the Second World War.

Adding to his discomfort, the new Foreign Secretary was regularly the subject of jokes from the Prime Minister and cabinet colleagues. May likened him to a dog that had to be put down. Philip Hammond quipped about him during his joke-fuelled 2017 Budget. All of which gave Johnson’s allies the impression that Johnson-hunting was a licensed sport as far as Downing Street was concerned. He was then shut out of the election campaign and has continued to be a marginalised figure even as the disappointing election result forced May to involve the wider cabinet in policymaking.

His sense of exclusion from the discussions around May’s Florence speech only added to his sense of isolation. May forgot that if you aren’t going to kill, don’t wound: now, thanks to her lost majority, she can’t afford to put any of the Brexiteers out in the cold, and Johnson is once again where he wants to be: centre-stage. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.