While there appears to be widespread sentiment in the industrialized world for some sort of formal restraints on financial executives' compensation as the sector recovers from last year's crash, Europeans and North Americans are taking different approaches to the issue.
In Europe, the United Kingdom and France have announced plans to impose a special one-time tax on bonuses awarded to top bank executives; in Britain, the tax would capture 50 percent of such bonuses. German Chancellor Andrea Merkel has also praised the idea, but noted that legal restrictions prevented Germany from imposing such a tax.
Meanwhile, Canadian Finance Minister Jim Flaherty rejected the idea as ill suited for Canada while calling on Canadian banks to revamp their bonus compensation plans to conform to new standards issued by the Group of 20 (G20) leading industrialized nations. "We want to grow Canada as a financial centre, so we don't want to impose punitive taxes on anybody. But at the same time, we expect compliance with the G20 standards," Mr. Flaherty told reporters in Ottawa.
Sentiment among policymakers in the United States also appears to run against taxes on large bonuses, even as news reports trumpet the return of outsized bonuses being paid to top executives of banks bailed out by the Federal government after credit markets collapsed last fall. U.S. Rep. Dennis Kucinich (D-Ohio) introduced a bill on Wednesday that would impose a 60 percent excise tax on bonuses awarded to executives of banks that have not yet repaid funds extended under the Federal Government's Troubled Assets Relief Program (TARP), but most observers do not expect it to pass. A similar bill passed by the House last year failed to win approval in the Senate.
In the meantime, the Associated Press reports that moves by Federal pay czar Kenneth Fineberg to slash executive compensation at the seven largest companies bailed out by the Federal Government last year are spurring banks to repay their TARP loans quickly so they can get out from under Federal supervision of pay policies.
Lobbyists for large banks in the United States argue that any taxes imposed on executive bonuses, combined with similar taxes being levied in Europe's financial centers, would lead top bankers to leave for banks in Asia or the Middle East.
There have also been calls in both Europe and the United States for implementing taxes on financial transactions in order to pay for the cleanup of troubled banks' balance sheets. The Obama administration has said that Wall Street should have to pay to clean up the mess left by the financial sector meltdown, but has refused to endorse any specific measures. A tax on financial transactions first levied during the Great Depression in the US was abolished in the late 1960s.
Written by Sandy Smith
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