Golden paydays for bankers over: Lawmakers

PARIS: While governments worldwide have not yet agreed on a solution to fix the current global economic crisis, nearly all agree on the cause of the problem: the large bonuses awarded to executives.

Bankers' bonuses have come under scrutiny as taxpayers money is being used to bail out ailing financial institutions. Some say the large bonuses caused some bankers to take excessive risks.

Shortly after US Treasury Secretary Henry Paulson announced a 700-billion-dollar (510-billion-euro) loan to buy financial firms' bad debts, Bernie Sanders, an independent senator from Vermont, organised a petition protesting at "the exorbitant salaries and bonuses" made by executives and traders.

Lawmakers on the other side of the Atlantic are now beginning to echo the sentiments of their American counterparts as European banks feel the pinch from the financial crisis.

British Prime Minister Gordon Brown said Thursday that "the days of big bonuses are over," slamming the "irresponsible behaviour" of some working in the financial sector.

Brown made his comments just one day after unveiling a 875-billion-dollar rescue package for Britain's beleaguered banks. One condition of the package being granted was that the banks would reform their pay structures.

Brussels too has weighed in on the matter. A group of lawmakers in the European Parliament published a report that called for greater regulation of executive pay.

"Market supervisors should assess whether the renumeration policy encourages extreme risk taking when they examine a company's risk management," the report said.

In 2004, the European Commission issued recommendations for tougher controls, but found little support from member states, apart from the Netherlands.

At the time, it invited member states to ensure that stock market-listed companies "disclose their policy on directors' remuneration and tell shareholders how much individual directors are earning and in what form."

However, since the current crisis broke out, member states are showing new-found interest in taking action to rein in executive bonuses.

At a meeting in Luxembourg on Tuesday, EU finance ministers reserved the right to dismiss executives of failing banks that get state bailouts without their 'golden parachutes', fat payoffs at the end of their contracts.

They also adopted recommendations that would allow governments to limit these payoffs, even at companies that do not get state bailouts, particularly in the financial sector.

The French government has already intervened to that effect in its joint 6.4-billion-euro (nine-billion-dollar) rescue of Dexia with the Belgian and Luxembourg governments. Paris insisted former chief executive Axel Miller be stripped of any right to his 3.7 million euro severance pay package.

Earlier this week, the French, Belgian and Luxembourg governments threw a 6.4-billion-euro lifeline to Dexia which was caught in the financial storm caused by the US banking crisis.