Goldman Sachs has announced that it will be lifting its cap on bankers bonuses – in line with the Tories’ reopening of the free-for-all on City pay. So, the Trades Union Congress (TUC) has urged other banks to “show restraint” and to not abandon bankers’ bonus caps; just as another bank followed Goldman Sachs lead.
Goldman Sachs: free-for-all
On Tuesday 7 May the TUC called on UK banks to “show restraint” and not to abandon the cap on bankers’ bonuses for senior staff. The call comes after Goldman Sachs announced last week that it would be lifting the cap – following the Conservative Party’s decision to allow banks to hand out unlimited bonuses.
As the Guardian reported:
Goldman Sachs has told hundreds of its top UK bankers that it is eradicating a cap on bonuses, in a move that will allow its star performers to earn up to 25 times their annual salary.
Richard Gnodde, chief executive of Goldman Sachs International, made the announcement during a video message to staff… It comes months after UK regulators confirmed they were formally scrapping EU rules that previously limited bonuses to twice an individual’s base salary. UK lenders including HSBC, Barclays and NatWest are planning to follow suit.
Gnodde said in the video that ending the UK cap would help level the playing field across its international workforce. “We are a global firm and to the extent possible we adopt a consistent global approach across everything we do. The bonus cap rules were an important factor preventing us from being consistent in the area of compensation.”
Under the previous legal cap an employee’s bonus could be no bigger than 100% of their annual pay, or 200% if there was approval from shareholders.
However, this cap on bonus payments was scrapped by former chancellor Kwasi Kwarteng as part of Liz Truss’ mini-budget.
The union body says banks could still voluntarily decide not to pay bonuses at a higher rate than the previous cap.
Large bankers bonus pool already
The TUC highlighted recent analysis which showed that even with the previous cap in place, UK banks paid out bumper bonuses in 2022 and 2023.
The union body says that in 2022 alone the annual bonus pool for workers in the finance and insurance sector was a huge £18.7bn.
TUC general secretary Paul Nowak said:
At a time when millions are struggling to make ends meet, it would just be plain wrong for banks to hand out even larger bonuses to those at the very top.
I urge bank leaders today to do the right thing and show some restraint. Don’t follow the example of Goldman Sachs.
The bankers’ bonus cap was put in place to stop the excessive risk-taking and greed we saw in the run up to the financial crisis. The Tories should never have abolished it.
We cannot afford a return to the bonus culture which crashed our economy.
If UK banks press ahead with abandoning the cap for senior staff it will be further proof of the huge disconnect between Britain’s boardrooms and hard-pressed families.
Sadly, banks are unlikely to listen to the pleading of the TUC. As Sky News reported, just hours after Goldman Sachs announcement, HSBC followed suit – with its AGM voting to life the bankers bonus cap as well.
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