It’s hard to argue with the principle of bonus clawbacks, so full marks to Lloyds Banking Group, which as exclusively reported in today’s Daily Telegraph has grasped the nettle and applied it to the 2010 pay packages of a number of senior executives, including the former CEO, Eric Daniels.
Their particular offence was the £3.2bn Lloyds was eventually required to provide for payments protection insurance mis-selling, a loss which coming on top of the disastrous HBOS acquisition and a subsequent state bailout does indeed make you wonder whether any bonuses at all should have been paid in respect of that year.
To act retrospectively is in most instances wrong in principle, but with bankers’ bonuses it is a bit different, as the short term profit generation on which such bonuses are frequently awarded can, as has plainly occurred in this case, turn into catastrophic long term loss. Bankers may think more carefully about the long term consequences of unbridled pursuit of the fee if they see such retrospective action more widely applied. To stand the test of public approval, bonuses have to be earned, not artificially generated.