No stop to bonuses at Babcock

Top brass at Babcock & Brown are reportedly still holding out for large bonuses even as their bank remains on life-support.

The potential payments to senior executives have angered the firmís rank-and-file and are proving to be a major stumbling block for the 25 banks involved in approving a rescue package for B&B.

The bailout proposal has already linked executive remuneration to progressively meeting debt repayment targets. But, according to the Australian Financial Review, many bankers arenít happy that their bosses might still stand to pocket millions over the next few years just for selling assets to pay back debt. Clearing up your own mess shouldnít make you rich.

ìThe message this sends out is not a good one. Bankers are disgusted that a bank which is essentially going out of business isnít doing more to reign in compensation,î says one headhunter who asked not to be named.

B&B should use stock options to compensate executives because this ties them to the companyís long-term performance, says Anton Murray, director of Anton Murray Consulting. ìThe danger with paying cash in this situation is that people will take the money and run from a struggling business.î

Bountiful executive bonuses at B&B will also stand in stark contrast to what most Aussie bankers are set to receive this year. The range for front-office staff will only be 5% to 10%, with some operations professionals getting next to nothing, says Murray.

But there might be some consolation for B&Bís middle and back-office crew. The firm has asked its bankers to approve so-called retention payments to key tax, legal and accounting staff in order to keep the business going while its assets are sold off.

Details of the compensation arrangement between B&B and its banks are expected to emerge early next week.