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Bankers' salaries

2024-03-02T04:55:49.460Z

Highlights: American banks functioned less than regularly in 2023, their profits fell in the fourth quarter by almost 45% year-on-year. Goldman Sachs paid its CEO, David Solomon, $31 million (a 24% increase over 2022), despite the fact that it closed the worst of its last four years. This reverberates the controversy after the Great Recession of 2008: the pursuit of short-term profit as a univocal strategy encourages a risk that can become dangerous. The homeopathic Law 10/2014 on the Management, Supervision and Solvency of Credit Institutions of 2014 should be rethought.


Does the remuneration incorporate all setbacks due to own management, as in the case of the blocking of Santander accounts of Iranian clients sanctioned for terrorism?


Are the remunerations of presidents and senior executives of banks and large companies logical?

It depends on the cases.

But quite often they generate comparative scandal, in general they are poorly explained and in some cases they are even worse justified.

American banks functioned less than regularly in 2023, their profits fell in the fourth quarter by almost 45% year-on-year, among other reasons due to the consequences of the Silicon, Signature and First Republic crisis: mishaps due to bad loans grew by 5 billion in the last quarter and the Government imposed a contribution of 16,000 million dollars on the large companies to the deposit guarantee fund.

But the pockets of the leaders of the large investment banks did not notice anything, on the contrary.

Goldman Sachs paid its CEO, David Solomon, $31 million (a 24% increase over 2022), despite the fact that it closed the worst of its last four years.

And what further denotes the imperturbability of power: “despite the negative impact of its strategies” on the entity's short-term performance, the bank tried to justify the measure because Solomon was “key in reorienting it to a much stronger position.” .

JP Morgan posted record profits and boosted Jamie Dimon 4%;

Morgan Stanley earned 12,900 million (12,750 in 2022), but bonused much more, 17.5% (37 million) to its dismissed boss, James Gorman.

The large Spanish banks were much better (26,000 million profit), due to the increase in interest rates without consequences of bankruptcies and without favoring the depositor, as well as due to the direct subsidy of 4% decreed by the ECB to their deposits in the banks. national centers.

So conventional benefits plus those that fell from the sky also favored some executives, although at a slower rate: Ana Botín (Santander) earned 12.2 million (4% more).

And Carlos Torres (BBVA), 7.6 million (0.8%), after pushing profits to 8,019 million.

The debate about the remuneration of bankers usually compares them with executives from other productive sectors and social strata.

But there is another pending discussion that may be a priority.

Does the remuneration incorporate all setbacks due to own management, as in the case of the blocking of Santander accounts of Iranian clients sanctioned for terrorism?

There is no positive evidence.

This reverberates the controversy after the Great Recession of 2008: the pursuit of short-term profit as a univocal strategy (and based on the metric of many theoretically variable

bonuses

at the top) encourages a risk that can become dangerous.

Also for the public coffers, implicit guarantee of any rescue.

That is why the homeopathic Law 10/2014 on the Management, Supervision and Solvency of Credit Institutions of 2014 should be rethought, in practice limited to preventing the variable part of the remuneration from exceeding the fixed part (article 34).

Perhaps it would be possible to harmonize some elements of the remuneration systems - or set limits on them, such as for entities with a public presence, article 35 - and guarantee greater transparency in their information to the public.

In large companies there is also everything, including reluctance to pass on poor results to the pockets of high command.

It is true that Telefónica lost 892 million and cut its president, José María Álvarez-Pallete, by 6.9%, to 6.32 million euros;

Repsol earned 3,618 million, 25.5% less than in 2023, but its CEO, Iosu Ion Imaz, only lost 5% (to 3.9 million).

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Source: elparis

All business articles on 2024-03-02

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