The head of the IMF has warned against fat-cat pay after noticing an increase in executive rewards across the banking sector.
Christine Lagarde used a panel discussion at the World Economic Forum annual meeting in Davos on Thursday to remind the financial sector against spiralling executive pay.
“Watch out where your compensation systems are, yet again, going,” she said to bankers.
She also urged the financial sector to aim for a greater purpose than just maximum profit and described the poor representation of women at the top of the banking business as “appalling”.
Lagarde said she was “a strong believer in incentive schemes, but added: “I think we’re seeing some incentive systems in some corners of the financial sector, yet again, moving in a direction that I find not exactly aligned with a sense of purpose that I hope banks actually have.” The IMF managing director did not name any individual banks.
Lagarde explained that the public now demands that banks have a greater purpose beyond the bottom line.
“We’re hearing that loud and clear from civil society, from the millennials, from many, many corners around the planet and I think any sector, the financial sector alike, has to have that purpose.
“It can’t just be single-mindedly the pursuit of profit, it has to be multifaceted and it has to take into account multiple stakeholders.”
The IMF boss, who famously said that the banking collapse would have looked much differently if it had been “Lehman Sisters” rather than Lehman Brothers dominating Wall Street, also took gender imbalance to task.
“The numbers are just appalling … you have 20% of board members in the financial sector who are women, and you only have 2% of CEOs who are women.” She said it was “business common sense… that diversity actually precipitates productivity and is good for all”.
She added: “There should be significant changes, we’re not seeing much of that and I hope the financial sector takes that approach seriously.”
