Remuneration after the bonus cap

The Bank of England's decision to drop the bonus cap has placed the issue of how to reward star players back on the financial services agenda. But how should compliance officers approach this sensitive subject and what are the reputational risks? Neasa MacErlean examines these and other difficult questions about banker bonuses.

Goldman Sachs revealed in May that it is abandoning the bonus cap for its top performing staff, who could be in line for bonuses of up to 25 times their salary [1] - and the move was soon followed by announcements from HSBC, Barclays, JPMorgan Chase and Morgan Stanley. [2] Adrian Crawford, employment partner at law firm Kingsley Napley, was from early on expecting more firms to "drop the cap and also do away with role-based allowances in order to be able to pay more to star performers". However, he is not predicting "an 80s-style investment banking pay bonanza", suggesting instead that only "a small number of very high performers will be given bonuses which exceed the cap". And HSBC's CEO Noel Quinn was one of the voices calling for moderation after the October rule relaxation. "We've got to remain sensible - and reward people appropriately", he told a Financial Times conference. [3] "I don't think we should use the change in the bonus cap to unleash an inappropriate amount of risk taking." Firms that take this route will adopt different parameters - with JPMorgan Chase opting for a 'ten-times salary' ceiling for bonuses, significantly lower than that at Goldman Sachs.