Banks cut bonuses, raise basic pay

With exorbitant executive payouts attracting severe criticism in the wake of the global financial crisis, most banks have reworked their compensation structures, especially cutting down bonuses, a survey by HR consultancy Mercer says.

According to the report, 65 per cent of the banks surveyed have increased the basic salary, while 88 per cent have severely cut down on the annual bonuses in their compensation mix.

"The majority of participants have changed the mix of pay (shifting from short term incentives to salary and deferred compensation) and modified incentive program design," the report stated.

The report surveyed 61 financial services: 69 per cent banks, 28 per cent insurance and three per cent others with just over half based in America and the remainder in Europe.

Moreover, 42 per cent of the participating organisations have eliminated golden parachutes or 'change in control' arrangements.

Although one year bonus guarantees are still used, 64 per cent organisations have limited or eliminated multi-year bonus guarantees, the survey added.

In general, organisations have a threshold performance requirement for the bonus pool and individual payouts and many have caps for the bonus pool as well as individual payouts, it added.

Overall, 68 per cent of the participants have made or plan to make changes to incentive programmes.

The Mercer survey also revealed that nearly all responding organisations either have a Long Term Incentives (LTI) plan or plan to introduce one.

Besides, share-based plans are the most prevalent than share options with less than half of the organisations offering cash-based plans.

In general the survey participants are pursuing executive remuneration strategies and plan design changes in line with the various regulatory guidelines.