Firmer action needed against bonus culture

HOW persistent, to the point of defiant, the bonus culture in banks has proved to be. Notwithstanding that it is totally dependent on taxpayer cash for its existence and that it still lost £257.5 million last year, the stricken Northern Rock revealed yesterday that it is paying staff £14.9m in bonuses. Without further detail it is impossible to tell how dispersed this bonus pool is.

But many will find it extraordinary that a bank synonymous with appalling judgment is in any state to be shelling out bonuses at all.

The announcement of results coincided with the unveiling of draft government plans to oblige banks to disclose the number of employees taking home half a million pounds or more. This represents a tightening of previous plans to force disclosure of pay packets in excess of 1m. The proposals are aimed at empowering shareholders to shape remuneration policies. Now City minister Lord Myners says the government "may go further" than the recommendations of Sir David Walker.

Governments should always tread warily in the field of remuneration. But where it is the sole shareholder (as with Northern Rock) it has a fiduciary duty to ensure restraint. Elsewhere, there is certainly a case for doing more to enforce disclosure to help shareholders keep rapacious managements in check. It is doubtful these measures alone will do the trick. Firmer action is needed to transform annual report remuneration statements from obfuscating small print into full and transparent disclosure.