HSBC chairman hits at big bonuses

[Frank]

Why is chief executive, Mike Geoghegan of HSBC's move to Hong Kong not considered Tax dodging? Surely he should pay Tax on earnings for the duration of his term in the UK on a pro rata basis.


HSBC chairman hits at big bonuses
By Patrick Jenkins, Banking Editor

Published: January 25 2010 23:26 | Last updated: January 25 2010 23:26

Stephen Green, chairman of HSBC and the British Bankers’ Association, has hit out at the inflated level and distorted structure of bonuses, predicting future pay-outs will be lower and more rationally calculated.

In a video interview with the Financial Times, published on the eve of the World Economic Forum’s opening day in Davos, Mr Green said: “In banks’ remuneration, there’s been plenty of distortion.

“You’ve had bonuses paid off gross income, you’ve had bonuses paid off first-day [profits], you’ve had bonuses paid without any capital charge, and so you can see how that gives rise to the wrong and frankly inflated numbers [we’ve seen].”

Mr Green, a devout Christian, and author of Good Value, a book on the morals of banking through the ages, said the industry “had very good reason to be uncomfortable, looking backwards”. He added: “As this newer environment beds down, I think you will see a market working in a way that we don’t need to be ashamed of.”

The debate about bankers’ bonuses has been stoked in recent weeks, first by the supertaxes announced in the UK and France, levied on bonus pools, then by the announcement last week of bumper Wall Street profits from the likes of Goldman Sachs and JPMorgan.

Both banks cut the ratio of pay-to-revenue from a typical norm of about 50 per cent to 30-40 per cent, partly as they passed on the cost of the UK tax to staff, but partly in an effort to placate the public.

Goldman scrapped cash bonuses and capped pay-outs to its top London staff at £1m ($1.6m).

On Saturday, the FT reported that Barclays would soon unveil a restructured pay programme, with high levels of deferred bonuses, including as much as 100 per cent deferral for up to three years for the bank’s most senior executives.

HSBC, which already defers at least 40 per cent of executive bonuses in line with new regulatory minimums, has signalled no wholesale revamp of its bank-wide bonus structures.

In spite of the crackdown on bonuses in the UK, Mr Green has signalled in private that the bank is likely to pass on some of the supertax to staff, absorbing the rest at the level of the bank.

Mr Green shrugged off suggestions that real damage was being done to London as a financial centre.

He denied that the bank’s recent announcement that the office of its chief executive, Mike Geoghegan, was shifting to Hong Kong, prefigured the possible abandonment of London as HSBC’s headquarters. “We’ll remain legally incorporated in London and have no intention of changing that,” he said.
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