Senior hedge-fund and private-equity managers may face long waits for bonus payouts in a push by the European Union to impose bank-style pay rules on the industry.
Bloomberg reports that bonuses for risk-taking employees should be withheld for a period of time to align managers’ interests with the long-term performance of the fund, the European Securities and Markets Authority said Monday.
Deferred parts of bonus awards should be paid out at least over a three-year to five-year period, ESMA said. Companies 'should consider longer' waiting times for 'members of the management body', according to guidelines published by the authority.
Payouts in the financial industry have been under scrutiny since the 2008 collapse of Lehman Brothers Holdings Inc. and the government rescue of American International Group Inc., which were blamed in part on traders and executives making risky bets to boost results and subsequent bonuses. EU lawmakers called last year for banks to ban bonuses that exceed fixed pay and are drafting similar rules for retail fund managers.
The measures ESMA offered in part echo EU rules for banker bonuses, which took effect in 2011 and include minimum three-year deferral periods. Robert Jenkins, a member of a Bank of England committee charged with ensuring financial stability, has said that bankers’ bonuses should be deferred for as long as 10 years to hold executives accountable for risks.
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