Banks agree that compensation for top executives contributed to the financial crisis and are trying to realign pay based on performance and long-term shareholder interests, an international bank lobby group said on Monday.
The Institute of International Finance released a report saying global firms are moving forward with reforms proposed by the group in July 2008 at an early point of the financial crisis brought on by excessive risk-taking by many of the world's largest financial institutions.
We are now seeing a whole range of fundamental changes in industry practices that are principles based and that is very encouraging, Bank of Nova Scotia Chief Executive Rick Waugh said in a statement.
Waugh, co-chair of the IIF's committee on implementing market best practices, however acknowledged that a lot of work still remains to fully implement compensation reforms.
The IIF said that a one-size-fits-all approach cannot be applied to employee compensation given the major differences among firms and their diverse goals and markets.
In the United States multimillion-dollar executive bonuses at troubled financial institutions, including insurer American International Group Inc, have sparked anger among U.S. lawmakers and the American public.
The issue of executive compensation also was a focal point during a meeting at the White House on Friday between President Barack Obama and the chief executives of top U.S. banks.
Obama said on Sunday that he told bankers whose companies received billions of dollars of taxpayer bailout funds that bonuses were just not acceptable while some Americans struggle to make mortgage payments and pay medical bills.
In releasing a study of its member global financial institutions, the IIF said companies realize that out-sized
compensation has taken a toll on their reputations and are trying to amend their ways.
The IIF said 37 of 70 of its member firms with significant wholesale banking businesses and asset managers responded to a survey conducted between December 2008 and March 2009.
The report said firms face a number of challenges for improving compensation practices including dealing with technical, environmental and organizational structures.
Industry compensation practices are changing rapidly, but lasting change will require significant time and effort, the IIF said in the report.
(Reporting by John Poirier; Editing by Steve Orlofsky)