U.S. banker-bonus rules unfair to Europe, says consultant

European banks are at a competitive disadvantage in employee compensation compared with their U.S. counterparts because of the different rules imposed by regulators, according to human-resources consultant Mercer.

The “unlevel playing field” is caused by the different U.S. and Europe approaches to deferred bonuses, Mercer said in an e-mailed statement today. About 88 percent of European companies surveyed have long-term incentive stock awards depending on performance conditions compared with 50 percent in the U.S., it said.

“Put simply, you’re currently more likely to receive your bonus payouts in the U.S. than you are in Europe,” said Mark Hoble, a partner who leads Mercer’s U.K. executive-compensation unit. “Although most deferrals are delivered in stock, they remain based on service in the U.S. As long as an employee remains at the company for three to four years, they will receive their shares.”

European Union regulators approved laws to discourage incentives for excessive risk-taking last year, imposing limits on cash payouts and the size of bankers’ bonuses. As much as 60 percent of a bonus payout for risk-takers and senior managers must be deferred for three years, and half of the remaining amount must be in the form of shares.

“Globally, there is a patchwork approach in the regulation of financial-services remuneration,” said Vicki Elliott, a senior partner who runs Mercer’s global financial-services human capital consulting team. “On one hand, the European approach has produced more consistency in compensation program design. On the other it has caused some changes that will cost companies more.”