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Top banker urges pay cuts for 'inflated egos'

The Local · 15 Nov 2009, 17:06

Published: 15 Nov 2009 17:06 GMT+01:00

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Klaus-Peter Müller, chairman of the supervisory board of Commerzbank – Germany's second-largest bank – and president of the Association of German Banks, reserved particular disdain for the big banks in the US and Britain, and urged Europe not to go down the same path.

“I really have no sympathy when they say there are big problems with curbing the excessive bonuses of investment bankers,” said Müller, who also heads the German government’s corporate governance commission.

“Worldwide, there are about 10 big investment banks. Why can’t they agree to pay no more excessive salaries?”

He urged his colleagues to think very hard about how much money their skills were really worth.

“Inflated egos are an attitude that a society sooner or later destroys.”

Overpaid workers in the banking sector were “primarily an Anglo-Saxon problem” he said.

He called on Europeans to steer clear of this undesirable trend, saying he was “hoping for a healthy new European self-confidence” on the issue.

Müller's strong criticism comes at a time when bonuses totalling billions are once again the order of the day, despite the backlash in the wake of the global financial crisis. The three biggest US investment banks, Goldman Sachs, Morgan Stanley und J.P. Morgan, are alone planning for bonuses totalling about €20 billion in 2009.

In Germany, Deutsche Bank is considered the major culprit, setting aside €1.3 billion for its 14,000 investment bankers in the third quarter of this year – more than double what it paid in the same period last year.

Commerzbank recently announced a plan to curb its own bonuses. Executive pay is limited to €500,000 as part of restrictions placed on the bank by the bank rescue fund SoFFin in exchange for an €18 billion bailout.

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Political leaders are likely to pay attention to Müller’s call.

Finance Minister Wolfgang Schäuble has told business magazine Wirtschaftswoche that banks “ought to be strengthening their capital resources” rather than paying out huge bonuses.

At a G20 meeting in April, leaders of the most powerful nations discussed the possibility of restricting compensation that rewards short term risk-taking.

The Local (news@thelocal.de)

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Your comments about this article

22:01 November 15, 2009 by Victor Scicluna
Executive pay is limited to €500,000

This is clearly more than enough, not even the President of the USA makes this and he has to decide if a country goes to war or whether he uses atom bombs.

No empoyee should earn more than ten times that of another emplyee within his own organisation. One can work twice as hard, but no amount of work can justify being paid 40 to fifty times what other employees earn. To this you need to add the salaries of people around these executives who do the real work.
10:21 November 16, 2009 by Keny
This may work in Germany or Europe but not in the US. European bankers know that government is breathing down their necks, but in the US, the rule makers are indirectly part of the banking institution. After three or four years in government, the rule makers was to return to the banking industry and make their millions/billions...no way they are going to make rules that will hinder their next salary.
12:40 November 16, 2009 by LancashireLad
Easy way to win popular votes for government - propose that bonuses should be commensurate to the success OR FAILURE of the institute. Shares should (in theory) operate like this, so why not the returns of those who have most control over the share performance?

Easy way for shareholders to curb the excesses. Shareholders should collectively demand that they be able to vote for the bonus levels ... or they can vote with their feet. I believe that's called accountability.
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