Cap on bonuses? Businesses say no

A total of 75 per cent of London firms polled by the London Chamber of Commerce and Industry dismissed an upper limit on pay, but 95 per cent called for closer links between pay and performance.

The results were debated by a panel at the chamber's City offices.

Panellist Greig Baker, research director at pollsters ComRes, said: "This is a sector which is certainly being targeted by the press, but a certain amount of responsibility falls on the shoulders of the businesses themselves because they're not communicating the reasons behind these bonuses.
"A board is not six people in pin-striped suits sitting in a club smoking Cuban cigars, plotting how to rinse the poor. Why are we not encouraging people to reach a higher level rather than talking about imposing a lower level that's easier to reach?"

Cass Business School's corporate governance and strategy professor Igor Filatotchev argued that while bonuses improve productivity, they could also encourage executives to become "risk averse" to protect their money.

He also pointed out that company shareholders are now less "hands-on" as shares pass from pension funds and insurance companies to hedge funds and sovereign wealth funds.

He said: "They're the executive's best friend, in that they invest long-term and don't interfere. These new investors are not shareholder activists.
"Incentive schemes can work but they should be complimented by shareholder engagement and an independent board. We should also realise that there's not a one-size-fits-all solution for every company."

HBOS policy adviser James Heal argued shares in the company encourage employees to care about the firm's progress.
He said: "There are certain bankers that have received larger bonuses than the chief executive due to their exceptional level of performance.
"More than 80 per cent of our employees also hold shares in the company, and that incentivises people across the spectrum to care about its success.
"It produces a longer term view. You're not just getting your bonus and blowing it in a nightclub. You're investing it in the future of the company."

But the Trade Union Congress' London policy officer Matt Dykes called for the Government to step in and curb executive pay, which he claimed was rising at five times the rate of average earnings.
He said: "The Government has a responsibility to produce a cohesive society where equal opportunity counts for something, and at the moment it doesn't."

Guardian columnist Polly Toynbee - a staunch opponent of bonus culture - failed to appear as scheduled.