The Canadian Minister of Finance, Jim Flaherty, made comments last week about stronger regulations regarding the bonuses that financial industry employees receive. With the world looking to Canada for leadership on the finance plateau, Flaherty needs to proactively avoid the scandals seen in American Banks who were paying huge bonuses to employees while simultaneously begging for a bailout.
Granted, there hasn’t been a public outcry of disgrace at the bonuses received by Canadian financial employees, but that doesn’t change the fact that much of the financial services industry is about achieving sales, using bonuses as incentives to meet specific targets.
Some would heartily argue a bonus skews the employees’ sense of integrity, and might tempt them to make riskier decisions. How many people are out there right now, with no idea what type of RRSP investments they are in, having relied only on the advice of their banker? Did said person invest according to the client needs, or invest according to the pressure to achieve sales numbers for their company? The higher up the ladder you go, the bigger the bonus structure.
The suggestions made by Flaherty are mostly to make the bonuses long term; paid out over several years rather than each year. This should reduce the potential risk from “get paid now” decisions, and keep Canada from entering the same bonus fiasco as seen south of the border.
