If you believe the screaming from US and UK bankers if you dare even blink an eye at compensation practices they will all move to another country, then you have to believe that the Royal Bank of Canada is set to lose almost all its employees. So, New York City and London - make way for an influx of immigrants - you can hear the moving vans from here, eh? [granted with the way the US dollar is being slashed and burned vs the Canadian loonie it's going to require even heftier pay packages simply to compensate for the almost daily currency losses]
p.s. don't you dare ask the question what country these banking elite would move to if US and UK followed these same changes
p.s.s. how is it in almost every other form of PRIVATE employment, global competition is pressuring wages downward - but in the banking elite it is driving up wages? .... aha, they have a unique skill set that adds more social and economic value than say a physicist - gotcha.
p.s.s.s. my solution is to put a good portion of their wages into deferred compensation and invest a portion of those deferred wages into EACH awesome and cool deal the bankers do. Then maybe the bankers will care about the outcome of the deal, rather than just pushing out volume like a Miami mortgage broker circa 2006. I know, I know - it's too simple and common sense to ever work.
- Canada's biggest bank, Royal Bank of Canada, is changing the way its investment bankers and traders are paid, according to a memo it sent to employees Tuesday. The bank said it conducted a thorough assessment of the compensation plan in its capital markets business, and decided to make a number of revisions.
- Its internal announcement comes as G20 leaders wrestle with the contentious issue of bankers' pay, which will be a key topic at this week's summit in Pittsburgh.
- Royal Bank told employees it is making the changes with good governance in mind, and it believes that they will enhance its risk management practices while helping it adhere to emerging regulatory principles. (risk management is for countries without a central bank who hands out money like Kool Aid at a 5 year old birthday party)
- The changes are in line with proposals from various regulatory groups and politicians seeking ways to prevent a repeat of the global financial crisis
- The bank's aim is not to decrease the amount its employees are paid, but rather to ensure that their pay packages are structured in a way that does not encourage them to take excessive risks.
The aim is immaterial Royal Bank of Canada. Whatever policy restricts bank employees from making outsized bets with other people's money, garnering the guaranteed bonus whether the bets win or lose, and putting the taxpayer on the hook from a systematic reinforcement of said bets via the Bernanke Put, is wrong.
- For instance, a greater proportion of Royal Bank employees' compensation will now be deferred, and managing directors will be required to own a certain amount of shares in the bank.
Making pay contingent on whether a risky bet actually works out in the end is unfair. Making workers responsible for the outcome of their decisions only works in non investment banking institutions; it only slows down innovation in the banks. Only at the beginning of the bet, should high 5s be handed out (along with a lot of moolah). What happens 2-3 years later is for the taxpayer to worry about. What sort of socialism are you running up there Canada?
- When it comes to calculating bonuses, the bank intends to pay more attention to how employees reached their results, not just what their results were.
- The bank is paying more attention to non-financial measures in part so it can take into account the amount of risk employees take on to achieve their financial goals.
- ln addition, RBC told employees it is in the process of finalizing a claw back policy, for cases where misconduct or a failure to abide by proper procedures results in a loss or the need to restate financial results.
Horrific mistakes through and through - remember, we have 2 classes of people (CEOs and bank employees) who are not motivated by the normal things the rest of the peons are. The peons are motived by doing a good job, or providing food for their family or putting a roof over their head. These are not things that motivate the special people in our land. If you only provide compensation at a level say 50x the average peasant you will have a subclass of unmotivated CEOs and bankers. That cannot be allowed to happen. Or they will move.
Canada - say goodbye to your bankers. We welcome them with open arms. And open wallets via taxpayer subsidization and backstop. We'll call it free market capitalism to boot (tee hee)
Give me your tired, your poor, your huddled bankers yearning to breathe free....
(hat tip to Canadian reader Steve for the news)