The debate has been raging on - but has been misconducted. European Union's proposal to limit bank bonuses to 1 month worth of salary assumes (has usually politicians do) that the world is immutable - and it is not. The truth is such a measure will have 2 short-term effects (and no long term benefits) - it will move talent out of European banks, to geographies where this limit doesn't exist (I thought France had learnt something with their 75% tax measure, but it doesn't seem so), and it will increase wages to compensate for lower performance bonuses (exactly the opposite effect you want to have in an economy that desperately needs growth). So, alas, once again, European politicians show their short-sightness and why the continent is now in serious troubles, with the increasing integration of all the economies on a global one.
Now, I understand and accept the root of this measure (except the populist part, please). The fact is that shareholders have lost control on corporate performance bonuses and they are increasingly biased to consider only short-term performance. This is a fact and problem. But the solution should be to tie bonuses to sustainable longer-term growth - and not short term spasms.
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