Excessive employee compensation at U.K. banks is denting public confidence in capitalism in the wake of the Libor scandal, according to the Institute of Directors, a management lobby group.
“Shareholder value has been destroyed, capitalism has been given a bad name, key measures of the market have been manipulated for cynical gains, taxpayers have shelled out billions to bail banks out, and yet vast rewards packages are still being handed out,” Simon Walker, director general of the Institute of Directors, said in a speech.
Discontent is spreading “beyond the professional anticapitalists in their Occupy tent cities” into wider society, including businesses’ investors and customers, he said, according to a copy of a speech to members of the Chartered Institute of Public Relations yesterday that was published on the Institute of Directors’s website.
Britain’s banks are under pressure to rein in executive pay and cut costs after a series of regulatory missteps in the years since the financial crisis, when taxpayers injected about 65.5 billion pounds ($98 billion) into Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc. Since then, RBS has been fined about $612 million and Barclays Plc 290 million pounds for attempting to manipulate global interest rates.
Barclays said on March 8 that it awarded 428 workers more than 1 million pounds in 2012, down from 473 in 2011. RBS said on the same day that it paid 95 employees more than 1 million pounds last year.
Reward for failure “has to change,” and pay structures must be reformed to assuage public anger, Walker said.
RBS said last month it will cut its bonus pool and claw back some compensation to help pay the fine on interest-rate rigging. At Barclays, Chief Executive Officer Antony Jenkins has said he won’t take a bonus following the Libor scandal.