Bank bonuses show world is unfair

By Olesya Dmitracova

LONDON (Reuters) - Bonuses in financial companies are sometimes excessive but pay inequalities are inevitable, witnesses told a parliamentary panel examining pay structures in banking.

In the past year, central bankers, politicians, investors and media have poured bitter criticism on lavish bonuses, which many say have encouraged the reckless risk-taking that spurred the world's worst financial crisis in decades.

"It is not, unfortunately, a fair world, and the people that are well remunerated ... are not necessarily those that you or I would choose to remunerate," Ronnie Fox, the principal of law firm Fox, told the Treasury Committee chaired by Labour Member of Parliament John McFall on Wednesday.

The chief executive of a large bank would typically get 1 million pounds to 1.4 million pounds in salary, a bonus two to five times that and, on top of that, shares to the tune of two-and-a-half to five times salary, said Carol Arrowsmith, a partner at Deloitte.

The MPs were in a combative mood, however, with McFall telling Fox at one point he was being "patronising" and saying: "Give us a break!"

Investment bankers tend to have a much lower basic salary -- topped up by an uncapped bonus -- than retail bankers, and for senior investment bankers, the salary would make up only 10 percent of their total annual remuneration, she added.

The highest-paid people at a bank are usually investment bankers rather than members of the board. In retail banks, the hierarchy of pay is more traditional, with board members enjoying the biggest rewards, Arrowsmith said.

Fox defended the principle of performance-based pay structures used by banks. "The people that earn most have contributed most to the shareholder value," he said.