British banks covered by the £500bn rescue package agreed by the government have agreed to curb executive pay and bonuses under the terms of the deal.
Prime minister Gordon Brown said any banks in which the government ends up owning a stake must be prepared to sign up to tough criteria on what they pay top executives. The government is currently in discussion with banks on a case-by-case basis. Brown added agreements would be drawn up covering executive remuneration, particularly the bonus system and dividend payments, as well as about improvements in supervision.
He said: “I think the right way of looking at this is where people devote hard effort and work hard, and where people are enterprising and are responsible in their risk-taking they should be rewarded. But where there is irresponsible or excessive risk-taking that puts not only a bank at risk but puts the system at risk, then we have to take action.
“That is why we are insisting now in any dealings with individual banks that we will have to be satisfied, on behalf of the taxpayer, that when we make these investments, executive remuneration is on the agenda so that excessive risk is not being rewarded, as it has been in the past, dividend payments are on the agenda and also the standards of supervision within the bank itself have got to be on the agenda as well.”