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UK plans to be first to legislate on excessive salaries

UK plans to be first to legislate on excessive salaries

Britain's Government has announced plans to make legislative history by being the first in the world to cap excessive salaries in the financial sector.Voluntary codes of practice on pay…

Britain's Government has announced plans to make legislative history by being the first in the world to cap excessive salaries in the financial sector.

Voluntary codes of practice on pay structures have already been introduced by Britain's financial regulator, the Financial Services Authority (FSA), but it says capping pay might affect London's competitiveness.

British Chancellor Alistair Darling has vowed that the "bonus culture" will no longer exist in the UK, accusing it of causing excessive risk-taking which activated the market crash last year, reported ABC News.

"What I want to stop is us getting into exactly the same mistakes that we saw happening in the bank industry over the last couple of years," he said.

"People were paid an incentive to take excessive risks which they did not understand and, even worse, the bank boardrooms didn't understand the risk to which they were becoming exposed."

Darling said he is prepared to set an example for the rest of the world by legislating the sector.

But chief executive of Panmure Gordon Investment Bank Tim Lanacre told ABC News that caution should be taken to think things through, otherwise the sector could be destroyed by political expediency, resulting in less employment and tax take.

In June US President Barack Obama proposed legislation that would give authorities and shareholders power to limit bonus payments to executives, but did not suggest set salary levels.

The Australian Government announced plans this year to outlaw excessive golden handshake payments, imposing shareholder approval for termination payments and potential penalties of $20,000 for individuals and $99,000 for corporations for breaches of the law.

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