EU nears cap on banker bonuses, as Osborne holds out

The UK is one of just three countries opposed to the cap.

EU banking reforms are set to impose a limit on bankers' pay, against the wishes of much of the City of London.

The proposal, backed by the democratically-elected European Parliament, would cap bonuses that exceed the recipients salary. France has recently come around to the idea, and, the Financial Times reports, there is now a "clear majority" which is willing to agree to the cap just to get the debate out of the way. The rest of the reforms, which are focused on bank capital ratios, are considered urgent, and there is little desire to hold them up over the pay caps.

The UK, leading those who oppose the pay caps, has suggested that even it is preparing to case on the basic idea, circulating a policy document suggesting reforms which "build on the principle of a cap", the paper reports:

It strengthens current rules enforced in the UK with an absolute ban on upfront cash bonuses that exceed salary and a requirement for bank shareholders to set a cap on variable to fixed pay.

But a ban on upfront cash bonuses is very different from the ban on the entire bonus exceeding salary. That proposed ban can, with a vote from a supermajority of shareholders, be weakened to a 2:1 ratio of bonus to salary, but even that is still a far more restrictive requirement than the one the UK desires.

The British government has reasons for its scepticism. The argument for including bonuses in a bill focused on bank stability is that, when a bonus can exceed the value of one's salary, the incentive to play it safe rather than go for massive short-term profits is reduced. But the UK also makes a compelling argument for focusing just on cash bonuses. Other types of bonus, like front-dated stock options or bonds which vest only if the employer still exists, can be tweaked so as to encourage not only profit but healthy, stable, profit.

In contrast, if the EU's current plan passes, the incentive will be to offer the entire value of the cap in up-front cash. The magnitude of the bonus may thus be shrunk, but its incentive effects could end up being perversely increased.

Nonetheless, politically the economic effects of the bonus cap are likely to be less important than the simple fact of its existence. The banking sector has been seen as overpaid by most of the British public for a very long time now, and if Osborne digs his heels in over what many will see as the right for banks to pay unlimited bonuses, he could find himself even more unpopular than he already is.

That is especially true if the importance of what is being delayed hits home. The capital ratios — which are the main focus of the talks — are widely seen as one of the first post-crisis regulations which could actually have a real effect on the likelihood and severity of future financial crises. By requiring banks to have a certain amount of liquid capital on hand, the move will, it is hoped, prevent the damaging bank runs which ultimately contributed to the recession in 2008. If the Chancellor is seen as holding the economy hostage over the right for banks to pay unlimited bonuses, his image as a canny political operative may be damaged somewhat.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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The Brocialist’s Dilemma: joining the revolution inevitably leaves others behind

We have to remember that other people have priorities, which might clash with our hero-worshipping of politicians like Jeremy Corbyn and Bernie Sanders.

It was Tony Blair who got me used to compromising my values for the sake of party unity and electoral success. After I voted for him in 2005, I knew in my heart that I could talk myself into voting for anybody if it kept the Tories out. Sure he’d planned and waged a war of aggression with disastrous consequences for millions of people, but he hadn’t privatised the railways. I’m not an Iraqi, I’m a guy who travels by train.

Having taken the Blair masterclass in compromising ideals, watching Jeremy Corbyn getting dragged over the coals for his various missteps all feels rather trivial. I found myself wondering just what it was going to take for Corbyn, who I don't dislike and will vote for, to outrage me to the extent that I’d want him gone.

Hell, I voted for the man who brought in university fees. I voted for him, and I knew as I did it that –had I been born just a few years later – there’s no way I’d have been able to go to university. I don’t know what Corbyn might do that would be a compromise too far given those I’ve already had to make over the years.

Left wing politics will always come with compromises, but what is telling is who has to make the biggest ones. We all want a unified and functional opposition, maybe one day a shot at government, but can we expect Jewish party members to simply ignore the failure to handle antisemitism in the party, or women to ignore so much about recent Labour selections?

It seems, at times, that what matters in Corbyn’s Labour is the new found sense of ideological purpose, rather than the trickier practical business of ensuring everybody is fairly treated and properly represented.

This brings us to the titular Brocialist Dilemma, because this is something that many of the men in the party will face whether they realise it or not. “Brocialist” is a generally pejorative term that tends to be applied to pugnacious white men piling into left wing or radical politics with earnestly held good intentions but little empathy and experience – and even less awareness of their lack thereof.

The Brocialist Dilemma is one born of coming into politics by choice looking to Fight the Good Fight, rather than having the Good Fight thrust upon you.

The dilemma is that if you are engaging with politics because you are an idealist looking to solve problems, which problems do you solve first? And whose problems do you push to one side in order to solve those problems? Where do you make your compromises?

You have to figure out who you’re willing to go to bat for and who you’ll let fall behind. There is no guide book for this, no master list of all the things that need to be fixed in left wing politics before it can be wheeled out like a massive cake to bring about global utopia.

We are all raised on stories of heroes leaping to the aid of the downtrodden for altruistic reasons. Plenty of us want to be that hero, but the shock of finding out that our personal intervention is not the tipping point in the struggle that we hoped it might be can be disheartening.

Nobody expects to answer the call to action only to be told to take a seat while the beneficiary of your munificence tries to find you something that you are qualified to help with.

More importantly than the disheartening effect on the enthusiastic would-be hero is the potential damage that can be done to the body politic itself. When thousands of energetic crusaders rally to the cause – intent on saving the world – but decide that your particular issues within that are less important, that your insistence on pursuing the agenda you got into politics to pursue is damaging, then we can see all kinds of unpleasantness.

It is not a coincidence that when you get huge numbers of highly engaged new people piling into a political cause that they bring with them what can charitably be called complications. I choose that word carefully because I’m still optimistic enough to believe that – for all the bile and spite being hurled around the Labour party in recent months – everybody is still, on a fundamental level, trying to do right.

Jeremy Corbyn is a huge draw for brocialists in much the same way as Bernie Sanders was in the US. This isn’t a complaint; you do want a leader who can motivate people, who can draw people into politics. Corbyn comes across like the wise old shaman who turns up in stories to guide the hero on the start of his journey to greatness. He is Obi-Wan Kenobi to a generation of left wing men who can see the world is an unjust place but don’t know exactly what they need to do to change it other than joining The Rebellion.

If there is a solution to the Brocialist Dilemma, perhaps it lies with Corbyn. What lesson can we take from the man himself? Is it to never compromise, to stick to your principles against all the odds? Perhaps. But also, and I would say more importantly, it is patience. Corbyn has spent decades campaigning for the causes he believes in, standing on picket lines, going on demonstrations – not always popular, though often right in hindsight.

At no point in his long and storied history of activism did Corbyn read the first volume of Das Kapital on his phone before getting bored and calling somebody a Blairite on Twitter.

If people can find the patience to learn, and the patience to teach, then perhaps we might all make it through this period in Labour’s history in a spirit of mutual respect. Otherwise we’ll be spending the rest of our lives calling each other names.

Phil Hartup is a freelance journalist with an interest in video gaming and culture