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Banks should publicise £1m employees A government-commissioned review has said the UK's banks should be forced to disclose to the public which of their employees earn more than £1 million a year. Sir David Walker, who led the report, called for extensive reforms to strengthen bank governance and increased disclosure on pay. Sir David also said in the report non-executive directors needed more powers to monitor the banks, but the Liberal Democrats have criticised it for not going far enough. The government has said they will implement the proposals, saying the disclosure on pay will be in the financial services bill; which will also give powers to the Financial Services Authority (FSA) to rein in excessive pay in the banking sector. Sir David said: "The fundamental change needed is to make the boardroom a more challenging environment than it has often been in the past. "This requires non-executives able to devote sufficient time to the role in order to assess risk and ask tough questions about strategy. "Institutional investors should be less passive and prepared to engage earlier if they suspect weaknesses in governance. They enjoy the privilege of limited liability whereas taxpayers have ended up assuming unlimited liability in respect of the big banks. "Early preventive medicine through shareholder engagement can save everyone substantial time and money later on." The report outlined that greater pay transparency was necessary in the big banks, and this should require them to publically disclose the number of employees earning more than £1m, broken down by bands of pay. But the Liberal Democrats, while welcoming the steps towards transparency, have said the report could have done more. Liberal Democrat treasury spokesperson, Vince Cable said: "It only deals with remuneration over a million pounds when it should relate to all pay above the level of the prime minister. "More seriously, transparency should relate to individuals in the way that it already does to company directors. "MPs and senior BBC executives have rightly had their pay packages exposed to public scrutiny but bankers also enjoy a taxpayer guarantee." "There is no justification for withholding information on individual high end employees from the public or shareholders." The Walker Review proposes that most of the recommendations made are enforced through inclusion in the Combined Code on Corporate Governance or a separate Stewardship Code for institutional investors, both operating on a 'comply or explain' basis. The British Bankers Association (BBA) has welcomed the report. BBA chief executive Angela Knight said: "Sir David Walker received widespread support from the many changes already taken place since interim report - indeed the industry is already adopting his early recommendations on board composition and responsibilities. "The UK continues to show the way on reform, which means we now need the international community to take up his recommendations, particularly on the disclosure of pay packages for senior staff. The banks have heard the call to publish this information, but they also see the risk in doing so, given that too many countries show no sign of following suit. "The UK is a large international centre and it is essential that other countries make the same changes at the same time."  26 November 2009, 12:00 |
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