Five financial institutions based in Germany announced that they have agreed to a set of principles for more ethical banker pay.
In a joint position paper, five firms — Deutsche Bank AG, Commerzbank AG, DZ BANK AG, HSBC Trinkaus & Burkhardt AG and HypoVereinsbank — commit themselves to ethical principles in the remuneration of bank management. “The core aim is to make remuneration systems open and transparent and to eliminate false incentives,” they say.
The firms say that by signing onto the principles contained in the paper they have committed themselves to leadership that is oriented towards success based on values, which requires that the remuneration and performance assessment of management need to be built on ethical principles as well as financial indicators.
Among other things, they say this means: that employee and customer satisfaction are relevant factors for calculating variable salary; companies should set maximum limits for the overall remuneration of its management; market-driven earnings that are outside management control must be factored into pay decisions, as do losses and employee layoffs. Also, management remuneration systems must avoid incentives that promote excessive risk-taking, and ensure that executives suffer on the downside if they benefit from the upside.
“Banks can only justify their existence by going about their business responsibly. First and foremost, this must emanate from the attitude of the banks themselves and their employees, and must be firmly anchored in the corporate culture. Our incentive systems are an important starting point for promoting sustainable business,” said Andreas Schmitz, chairman of the management board, HSBC Trinkaus & Burkhardt AG.
“The principles that have now been drawn up show that we are taking our responsibility seriously and that the financial institutions are making their own contribution to bringing about change,” added Dr. Theodor Weimer, spokesman for the management board at HypoVereinsbank.