PWC chief: market will cut fat cat pay

Published on Saturday 5 September 2009 13:46

A DAY of reckoning is still to come for overpaid executives, a senior figure from one of the "big four" accountancy firms has warned, despite advocating the need for hefty salaries to attract top talent to financial services.

Frank Blin, head of PricewaterhouseCoopers (PWC) in Scotland, said: "Do I think there are still groups of people who are significantly overpaid in financial services? Yes I do."

In an interview with Scotland on Sunday, he argued that salaries would come down more as a result of market forces than government pressure on banks to end their bonus reward culture.

He said a poorly performing market would drive down the price of executive talent. Blin compared financial services to Scottish football, where prices for players have remained flat or fallen due to shortfalls in TV revenues.

"Supply and demand may well have an impact in terms of re-balancing the marketplace," said Blin. "It has happened on the football field in Scotland."

Blin also chairs a nationwide group set up by PWC to address its "banks under strain agenda". The team works with the UK government and regulators on issues such as how to value "toxic assets" and the "tetchy" issue of remuneration policy.

Blin is gloomy about the economy as he expects further wilting of consumer demand. But he said negotiations with lenders and customers over existing debt piles were "bedding down", meaning there was an end in sight to the hiatus in corporate lending.

"Negotiations (between lenders and customers] in the last few months have been extremely stressful," said Blin. He added that businesses were now better able to execute plans in the medium term. But he admitted there were still "problem children" trying to work out deals with lenders. He said that while he is "not aiming to be a saviour of the banks in terms of their reputation", he does not think they would refuse to support businesses if they could find a solution for them.

Blin expects confidence to return to the corporate sector when bank-backed assets, such as property, come on to the market and when funding is available. He said: "Many private equity funds are becoming restructuring funds. If I had a pound for everybody who phoned me and said 'We are looking for some distressed assets', I would be doing very well.

"That weight of appetite will eventually lead to some things happening and the values will start to move off the floor to a reasonable level."

PWC will tomorrow unveil its results for the year. Blin said he is pleased with the firm's performance in Scotland, where revenues have grown by more than 5 per cent to 110 million.

Much of this was down to a "big upturn" in corporate recovery, as well as advising clients on pension deficits and tax efficiency.