LONDON: British-based banks will be forced to reveal how many of their employees earn more than GBP1 million a year under new laws expected to show that hundreds, perhaps thousands, of London bankers are made millionaires each year.
But in introducing legislation to adopt the key recommendations of Sir David Walker in his 167-page report published today, the UK government will allow banks to keep the identity of “high-end earners” a secret. Ministers had suggested that the top 20 highest-paid employees should be named and shamed.
Walker, who has been reviewing corporate governance at banks since February, will disappoint those who believe the pay levels should be revealed for the current financial year, as he is not expecting the ground-breaking changes to be implemented until 2011.
He insists, though, that he is creating “a more demanding regime than that currently in place in any other major jurisdiction”. Asked how many people would be revealed as earning more than GBP1 million, he said: “Hundreds, if you are asking me, certainly, but possibly thousands. I’ve put a big wedge in the door and it can be refined. This doesn’t exist in any other country,” Walker said.
The UK’s finance minister, Alistair Darling, welcomed the report, which also calls for shareholders to adopt a new code of stewardship. Darling now intends to call major investors to the Treasury to demand their compliance.
Walker wants greater emphasis on the role of chairmen, whom he believes should devote two-thirds of their time to the banks they oversee. However, he risks being accused of forcing up boardroom pay after conceding that chairmen could demand larger fees for the extra effort involved.Bank chairmen should also stand for re-election to the board each year to make them more accountable to shareholders.
Walker, former regulator and banker himself, urges voluntary improvements to corporate governance and boardroom behaviour rather than reform through regulation.
Although his report makes 39 recommendations covering areas from bolstering shareholder oversight to the way boards operate and to keeping powerful chief executives in check, the two that will shed more light on excessive pay are the only ones that will need legislation.
To ensure that big-paying American banks such as Goldman Sachs and Morgan Stanley are included in the new requirements, he recommends that UK subsidiaries authorised by the UK Financial Services Authority (FSA) comply with any new law. These foreign-owned banks would also have to show pay received outside the UK to avoid any circumvention of the rule.