First with Financial Comment from Arabia

Former DIFC governor’s $13.5m bonus ruled illegal

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Last week the former governor of the Dubai International Financial Centre was arrested for questioning on financial irregularities. Yesterday it emerged that Dr Omar bin Sulaiman is alleged to have paid himself $13.5 million in bonuses during his tenure.

Around the world the public is aghast at the size of recent bonuses paid to bankers, particularly those bankers whose institutions had to be bailed out by governments in the financial crash. Some have chosen to give their bonuses from last year to charity rather than face this embarrassment.

Reward too big

It has certainly been the case that bankers were paid far too highly in the late stages of the boom, and it is hard to believe that the prime organizers of this compensation were none other than the bankers themselves.

When the market moved against them the fact that some banks were ‘too big to fail’ meant that they had to be bailed out, and from a legal standpoint their contracts continued and the bankers got paid their bonuses.

In the case of Dr Omar we do not have sight of his contract with the Dubai Government as a public official, and so are not in a position to judge whether he was acting legally in paying himself the alleged bonus of $13.5 million.

A report from the Financial Control Department of the Dubai Ruler’s Court accused him of ‘abusing his position in appropriating public funds’ so it looks clear that the line in the sand between what is legal and what is not had been crossed.

Many members of the public in developed economies would wish that bankers’ bonuses could also be referred for public prosecution. They feel a considerable breach of natural justice has occurred.

Just rewards

Certainly for senior bankers there is a question market over the scale of recent bonuses, with banks acting like the ultimate in hedge funds with their depositors money: taking what we now know to be huge risks with public money at no risk to themselves, and being paid handsomely whether or not that risk paid off.

In this climate of exceptional compensation it is understandable that the governor of the DIFC might feel himself entitled to a bonus of a similar scale, however ridiculous that might sound to readers.

None of the CEOs who brought the world to its knees in the financial crisis is now behind bars but the ones giving their recent bonuses to charity have the right idea. That said crime must never be allowed to pay, and when theft becomes legal the law should be changed.


Written by Peter Cooper

March 25, 2010 at 7:48 am

Posted in Banking, UAE Stocks

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