- Daily Zen
Simon Walker, the director general of the Institute of Directors, sharply criticized UK’s banks such as Barclays and Royal Bank of Scotland for offering excessive employee compensation in the form of wages and bonuses. Moreover, Simon Walker has underlined that UK’s banking industry is being harmed by bankers’ short-term self interest as banks are breaching the bonus cap formulated by the European Union.
On the 12th of March, Simon Walker highly criticized Barclays and Royal Bank of Scotland as they supposedly paid more than £1 million each to its bankers in the form of wages and bonuses. Barclays and Royal Bank of Scotland were caught in an awakening probe a year earlier as they suffered huge litigation and impairment charges after rigging the Libor inter-bank lending rate. Therefore the £1 million remuneration package offered by the banks raised the eyebrows of many, especially Simon Walker. Barclays and Royal Bank of Scotland together paid as many as 523 people these scandalous bonuses. According to a statement released at an event held by the Chartered Institute of Public Relations on the 12th of March, Simon Walker stated that the “unacceptable” payouts given by Barclays and Royal Bank of Scotland had undermined shareholder value.
In addition, Barclays stated that it offered nearly 430 workers a pay package of more than £1 million in 2012 while 5 employees were paid more than astonishing £5 million. According to a statement released by Royal Bank of Scotland on the 8th of March, the bank announced a £1 million-plus pay to nearly 95 of its employees. However, Barclays and Royal Bank of Scotland were informed about the possible consequences of increasing remuneration. Moreover, the increase in fixed pay would eventually lead to low flexibility and reduce productivity while minimizing the chances of decreasing payouts from the current level.
Simon Walker strongly believes that excessive employee compensation can adversely affect the banks short-term business. “Thousands of people in those two companies alone earn more even than the Prime Minister. This is in scandal-hit companies who have had a far from successful year,” underlined Simon Walker.
In his speech on the 12th of March, Simon Walker expressed concern over the consequences of Barclays and Royal Bank of Scotland following the breach of the bonus cap formulated by the European Union. Due to the excessively high compensation rate, Simon Walker feels that the shareholder value of the banks may decline. In addition, high pay packages offered in scandal-hit banks may undermine public confidence in capitalism. Royal Bank of Scotland, which is partially owned by the government, reported a total salary of over £20 million of its top directors and eight executives.
Barclays and Royal Bank of Scotland suffered heavy litigation charges in 2012 worth £290 million and nearly £390 million respectively. However, Barclays is expected to increase fixed salary by 75 percent and reduce bonuses by the same amount in order to reform its pay structure and cope with the impairment charges. Likewise, Royal Bank of Scotland is planning to evaluate the impact of the bonus cap on the remuneration in the forthcoming shareholder meetings.