Thursday, 10 September 2009

Dutch knock out Scotland, and take the lead on executive pay

Sorry! It's yet another HR Case Studies item on executive pay! This week not only have the Dutch shattered Scotland's dreams of World Cup glory, but they are also on the verge of becoming first nation to put a cap on the value of bonuses paid to their most senior banking executives.

Their new code, drawn up by the Dutch bankers’ association and the finance ministry, will restrict such pay-outs to one year’s salary. The code does not extend to traders and investment bankers who are not executive board members, but it does call for a "meticulous, restrained and long-term remuneration policy" (along the lines of the guidelines issued this week by the CIPD). The Dutch finance minister has stated that such a code would not even have been debated a year ago. The approach of the Dutch will inevitably put increasing pressure on other countries attending the G20 summit in Pittsburgh later this month.

Surprisingly, rather than rejecting the introduction of the code, the chief executives of ING Bank and ABN Amro have given their broad support, even if they will have to face the future challenge of how to attract foreign executives.
  • Will other nations follow the lead set by the Dutch?
  • How effective will this code be if only the Dutch follow it?
  • If banks in the Netherlands are unable to compete on the basis of high bonuses, what other methods may they be considering to attract talent from elsewhere in Europe where such a code is not yet in place?
  • The code affects board members, but not traders and other senior managers who are not on the board. Is this likely to tempt successful managers to remain below board level?
  • Further research activity: What are the major Dutch financial institutions that are likely to be affected by this decision?

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