Sarkozy, banks set new limits on bonuses
French banks agreed to penalise traders who lose money for their firms after getting a bonus and to limit other payouts as part of a government effort to trigger a global clampdown on financial-sector salaries.
The remuneration rules were unveiled after a meeting between President Nicolas Sarkozy and France's top banks, including BNP Paribas and Société Générale.
To ensure banks stick to the new criteria, Sarkozy appointed a "pay czar," former French central banker and IMF managing director Michel Camdessus, who will monitor the bonuses of the 100 best-paid traders at each bank in France.
"It can't be a game where you always win," Sarkozy said.
He said he would lobby the US and other European countries to adopt similar measures at the Group of 20 summit in Pittsburgh next month. Sarkozy said France wouldn't cap bonuses singlehandedly because it would prompt an exodus of bankers.
He would likely face strong resistance in the US and UK said Anant Sundaram, a finance professor at Dartmouth's Tuck School of Business. "I don't see how it is in the realm of remote possibility," Sundaram said. "The government proactively setting pay scales is a nonstarter from a cross-border standpoint. It is so fundamentally antithetical to the Anglo-American notion that compensation has to be a function of failure and profit."
Sarkozy fears that repeated pay scandals may fuel resentment among voters. France's opposition Socialist Party has criticised him, saying he should just levy higher taxes on high earners, and traders in particular. Sarkozy said he was "shocked" to see how quickly some had forgotten about the crisis "even though we still haven't turned the page."
Under the new rules, traders can't receive more than one-third of a bonus in the first year. The balance will be staggered over the next two years. If the trader's department loses money during that time, traders could lose up to two-thirds of the bonus.
Write to David Gauthier-Villars at David.Gauthier-Villars@wsj.com This article can be found online at http://europe.wsj.com/home-page
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