August 27, 2009

The battle over banker compensation may now have a new twist.

French President Nicolas Sarkozy announced he will shun banks that do not enact caps on the bonuses they mete out to high-paid workers, according to Bloomberg. The report says analysts and bankers in the U.S. were alarmed by this development, especially since Sarkozy would be bringing this idea to the G20 Summit in Pittsburgh next month and, potentially, straight to President Obama.

One analyst interviewed by Bloomberg said Sarkozy is "coming to Pittsburgh and is going to be whispering in the ear of a president who has shown some willingness to listen to that kind of thinking. President Obama has made a lot of scathing comments about banks and bankers' compensation."

In other words, the nation of France will not do business with financial institutions that do no implement some kind of limit on its executive compensation. The article says France won't hire financial firms "unless they apply rules agreed to by French bankers that include a three-year deferral on two-thirds of bonus payments."

The Obama administration is working on a program that would seek to limit pay practices that it feels help feed the risk-taking that led to the financial crisis. Already, U.S. financial institutions are taking action, adding clauses to some employment contracts stating that "some compensation may be subject to government approval or limitations," according to Bloomberg.

"This is a good way for the corporation to save face if it's challenged by the government, being able to say we looked into this and took this into consideration," said Thomas Lewis, a lawyer at Stark & Stark in Princeton, N.J., told Bloomberg. "It's probably only going to come into play with the very high-wage earners."

The full article can be found here.

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