Bankers’ bonuses and the financial crisis: Context, evidence and the rhetoric--policy gap

Analysis of UK financial sector bonus schemes in the years immediately prior to the financial crisis of 2008/09 reveals significant changes in their structure and complexity. In terms of the determinants of levels of bonus award, leverage as a measure of risk exposure is not significant, whilst scheme complexity and return on assets are. The results challenge the supposed link between risk exposure and bonus practice. In this context, we seek to shed light on the UK government's contemporary rhetoric in relation to the regulation of bonuses and its subsequent inaction in terms of sustainable control measures.