Are investment bankers still paid too much?

John Mack

John Mack, the chairman of US bank Morgan Stanley has controversially stated that bankers are still paying themselves too much - it comes at a time when the banking industry is trying to justify its big bonuses.

All through the current bank earnings season, banks have sought to defend bonuses by saying the ratio of compensation to overall revenues has been cut back, The Financial Times states.

"I still don't think the industry gets it," Mack said during an appearance in Charlotte, North Carolina. "The issue is not structure, it is amount." He spoke at a question-and-answer session moderated by former Bank of America Corp. Chief Executive Officer Hugh McColl Jr. at Queens University, a private institution whose graduate business school is named after McColl.

Banks are reforming pay by focusing too much on structure - such as deferring bonuses to later - rather than the huge amounts being paid out, he said.

Earlier in the week, the New York state Comptroller said that Wall Street banks may have paid more than US$55 billion in bonuses last year.

"If we don't do something, the government will do something," Mack told the BBC.

Political issue

On both sides of the Atlantic, the issue of bonuses has become a huge political issue, as many of the banks that are paying bonuses to staff made losses during 2009 and were bailed out by taxpayers.

On Thursday, Royal Bank of Scotland - which is 84 percent-owned by the UK government - said that it made a loss of GBP£3.6 billion in 2009, but will still pay GBP£1.3 billion in bonuses to staff - sparking anger.

Mack used the example of a trader that recently left Morgan Stanley - the 28-year-old trader's unit had earned as much as US$400 million for the bank. Morgan Stanley had offered to pay him US$11 million, but the trader left to join a hedge fund that paid him US$25 million, Mr. Mack said, according to Bloomberg News.

Morgan Stanley reported record losses in 2008 and survived the financial crisis because of government aid.

Mack, who has not taken a bonus for the last three years, recently stepped down as chief executive but remained chairman.

Jodie Humphries

Jodie Humphries graduated from Bath Spa University with a BA Hons in Creative Writing in 2008. She has worked for GDS Publishing for the digital group since July 2009. She has previous experience with writing for the web, running her own website since April 2007.

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