February 10, 2009

Bank executives say bonus system is flawed

Former bank executives told a British House of Commons committee that bonus pay for bankers contributed to the financial crisis and warranted a review.

The bonus system has proved to be wrong. Substantial cash bonuses do not reward the right kind of behavior, said Andy Hornby, former chief executive officer at HBOS, the BBC reported Tuesday.

Hornby told the Commons' Treasury Committee he had never received a single penny in cash bonus but had lost considerably more money than I have been paid by taking his bonus pay in the form of bank shares.

Former Royal Bank of Scotland CEO Fred Goodwin said he lost about $7.3 million on the value of his bank shares in 2007.

However, he said he wasn't complaining, telling the BBC that he could not be more sorry for the bank's failure.