British banks should be forced to disclose the number of employees who earn more than 1 million pounds ($1.65 million) a year, a government-commissioned review of corporate governance in banks said Thursday.
The report from David Walker, former chairman of Morgan Stanley International, also proposed other measures to rein in risky activities at banks. It recommended strengthening the role of non-executives to give them new responsibilities to assess risk and payment and said active investors should sign up for stewardship duty so that they can play a more active role as owners of businesses.
"Institutional investors should be less passive and prepared to engage earlier if they suspect weaknesses in governance," Walker said in the report. "Early preventive medicine through shareholder engagement can save everyone substantial time and money later on."
Walker said tduring the financial crisis there was a narrow focus on pay received by banks' executive board members _ but bank owners knew little about cash paid out to the much larger number of high-earning non-executives.
"My proposals will provide much greater information to owners (of banks) to say, 'Hang on a minute, why are you paying so many people so much money?'" he told the BBC.
He said he believed there were well over a thousand people earning more than 1 million pounds a year in London's banks and financial institutions.
The report also recommended that two-thirds of cash bonuses should be deferred and that at least half of variable pay or bonuses should be paid in the form of a long-term incentive plan.
The report was commissioned in February by British Prime Minister Gordon Brown to address excessive financial risk-taking and failures in bank management _ seen as main contributing factors in the crisis.
On Thursday, Treasury chief Alistair Darling said the government backed Walker's proposals and will take immediate steps to implement them.
"The culture of the banks themselves must change," Darling said in a statement. "Sir David's proposals are the blueprint for how banks must be run in the future."
Banks will be forced to disclose the number of top-earning staff for the 2010 performance year, he said.
On the Net:
Walker Review: http://bit.ly/6hQvwA