Rijkman Groenink, the former CEO of ABN Amro Bank who was heavily criticized for leaving the bank with € 26 million ($ 37 million) in severance pay mid 2007, weighs in on the discussion about high-risk/high-reward bonusses. Bottom line?
"I fully appreciate the views of many, many people about excessive compensation but in this case it's not linked to high-risk, high-reward bonuses at all," he says, before going on to comment on the "unique opportunity" that has arisen to forge a global consensus on linking risk and reward. "At ABN Amro we were moving towards a situation in which we would more and more try to link short-term bonuses to the bottom line of the performance," Mr Groenink says, easily slipping back into his old role as figurehead for the bank, despite the two-year interval.
He is hopeful that regulators and governments around the world can agree on banning bonuses on speculative trades that might later lead to huge losses. But the wider issue of limiting absolute pay would probably prove too difficult, he said.
Last weekend, ministers of finance of the most important industrial countries (the G20) agreed:
- that bonusses of bankers should be stretched over a multi-year period;
- that a guaranteed bonus cannot have a life-span of over a year; and
- that banks should be able to 'claw back' paid bonusses if - with hindsight - the bonus was unjustly paid.
Details to be designed at a later stage. A bonus cap, as urged by France, Germany and the Netherlands, was not installed due to objections by - no surprise here - the UK and the US. Not all that impressive, but it's a start.