February, 18, 2010

One of northern Europe’s leading bank executives has questioned the commercial rationale for bonuses and championed the case for fixed salaries in the industry.Pär Boman, chief executive of Sweden’s Handelsbanken, said bonuses risked creating a “mismatch” between short-term incentives and long-term performance.While many bank executives have acknowledged the need for pay restraint and a shift towards longer-term incentives, few have gone as far as Mr Boman in rejecting the business case for bonuses.

“I do not believe you can combine long-term commitments with short-term incentives or you will have a mismatch,” he told the Financial Times. “That doesn’t mean I’m against bonuses in principle but, in our company, we cannot see that they will help us develop the bank in the long term.”Handelsbanken, the second-largest Nordic bank by market capitalisation, was sceptical of bonuses long before the financial crisis, with most of its employees, including senior management, paid only a fixed salary.

.

.