GUEST COMMENT: I'm still waiting for pay to be really reformed

There's an enormous fuss being made about bankers' pay and efforts to reform it. As a result, we have 'new' compensation arrangements. From where I stand, however, they don't look particularly new at all - unless I'm missing something, of course.

1. Deferrals

Deferred payments have been held up in the press and by politicians on both sides of the Atlantic as the silver bullet when it comes to managing the taking of excessive, longer term risk at an individual level. Portrayed as a totally and utterly new idea that will reform compensation arrangements and tie incentive payments to the long term health of the firm, deferred pay has, in fact, been part of most senior people's contracts for years. Usually kicking in after a ceiling of around 100k, most banks have paid percentages (often up to, and in some cases above, 50%) of bonus payments in stock or stock-type arrangements, vesting over three to four years for at least the last ten years. So what, exactly, is new?

Well, RBS is rumoured to be paying in stock this year on any bonus over 30k but, if the well sourced rumours flying round the city are the be believed, a portion of that stock vests in June and employees have been assured that a market will be made to allow them to dispose of their holdings at that time. This is more or less, therefore, a cash payment and is considerably more palatable to recipients than previous ABN AMRO norms of deferring between 30% and 50% of payments over three years.

2. Clawbacks

The most feared and yet least clear twig on the new broom, claw backs are intended to provide employers with the ability to take back portions of deferred comp in certain circumstances. The theory being that if you place a risk trade in 2009 that pays your bonus that year and which then sits on the books and slowly decays over the next three years, your employer can get their money back by not paying out on any deferred portion of previous year's bonuses. So far, so Daily Mail-tastic.

However, unfortunately for the baying masses (but I suspect with the full knowledge of the people who make these rash promises), it is proving very difficult to implement. Will it apply only to traders? At what level do you record the loss and how and at what level do you prove accountability? Apparently, the French regulator is working on a system that is so complicated, no one seems to understand it.

3. Increased fixed vs. variable compensation

Ok, maybe some significant changes have happened here. There have been big increases in basic salary at the firms where these rises have been implemented. Moving 100k into salary for someone who earns over 500k a year is neither here nor there but for a large number of more junior and most non revenue generating staff, this is a windfall. While the total comp number for these people (who used to earn salaries of 90k to 120k and are now earning 120k to 200k) may not change they will no longer be subject to the year by year vagaries of bonus payments let alone the possibilities for deferrals.

As the group that is most likely to be cut back or zeroed in a bad year, they are now insulated from these swings and more likely to be better off overall (unless, of course, their employer needs to cut its fixed cost base quickly, which - as this year goes on - is looking increasingly likely).