French banks BNP Paribas and Société Générale have already promised to defer two thirds of bonus payments for three years and to pay out a third in shares, while also pledging to stop offering guaranteed payouts to new hires.
Sarkozy intends to ask the G-20 at its meeting in Pittsburgh in September to consider capping the total amount paid out by banks in bonuses and to consider setting limits on the size of individual bonuses.
Germany has already spelled out new rules on compensation that will go into effect on January 1, but more recently the chairman of the UK regulator, Adair Turner has suggested banks are earning too much money, and curbing this via a tax on transactions will be one way to ensure the bonuses are reduced. This provoked a furore in the city, which understandably fiercely opposed his proposal. The UK government has also denied it is considering a tax on transactions. While Angela Knight, chief executive of the British Bankers' Association, also defended the financial industry's role in the economy, saying the sector was a main provider of jobs and tax revenues and could be undermined by the wrong kind of taxes or regulation.
Moves in Europe to curb compensation will be of keen interest to president Obama and his newly appointed pay czar Kenneth Feinberg, who has been tasked with establishing pay guidelines for executives at the rescued companies. It is as yet uncertain whether the terms he decides upon will be made public over fears by bankers that highly remunerated individuals will be targeted by populist anger.
"There is a tension between not wanting to put on the front page of every newspaper in the country the specific compensation packages of these individuals ... versus the public's right to know," said Feinberg in a statement on August 16.
The Treasury Department has indicated it will not make public information that would identify individual employees, but suggested it will publish final determinations on pay packages in compliance with the Privacy Act.
Reuters has submitted a request under freedom-of-information laws to review the pay proposals submitted by the seven companies. The Treasury has yet to respond.