Summary
It will only be by such shock tactics that the pain might be remembered for generations to come to try to prevent them from acting with such irrational exuberance in the future. Where are all these disgruntled executives going to go? Who is going to pay these numbers? No shareholders are going to sit by and witness golden handshakes and 'hello' bonuses any more. Reality has to come to these people too! The old chestnut that we need to pay these exorbitant salaries and bonuses to attract the talent just doesn't wash any more. This so-called 'talent' has literally brought most of the world's leading economies to their knees.
Analysis
I think that this move has repercussions for government bail-outs all around the world. If the US move first, others will gladly follow.
With major banks around the world going to their governments with caps in hand they have to open their closely guarded world to closer scrutiny.
Directors presenting their accounts to shareholders will have to defend vigourously the remuneration packages of their top people
There is no company loyalty any more as a growing number of senior people are with the company for their career prospects as opposed to development of the company. By linking their personal rewards with the performance of the company was seen as a win-win for all parties and has been the thrust of business teaching for the past 25-30 years, we now see the fruits of the downside. Short-termism has taken the place of proper structured planning. Investment analysts 'herd' mentality has produced businesses focussed on near term quick win profits rather than long-term sustainable ones.
Unfortunately when there is state intervention of this kind which is very welcome now, it can't last for long. Companies will find other ways of remunerating their top people and some may not be in the spirit of this proposed legislation. We will have people spending their time on thinking of ways around this and not on ways of getting the company/bank out of its predicament.
The governance by the Regulators also comes into focus as they need to be seen to be keeping their eye on activities. Pressure will be on them to keep up with developments and allow the banks/companies to engage freely enough to trade out of their mess.
Perhaps after the senior management the other people opposed to these measures will be the recruitment agencies, head-hunters or excecutive selectors, whatever title they go by! As their fees are a combination of a retainer and a percentage, it is their interest to increase the bottom line of the package. With a glut of 'talent' now available at knock-down prices, this industry has its work cut out in justifying its existence and its fees.
