MercoPress. South Atlantic News Agency

Pittsburgh summit recognizes historic shift of power to G20

Emerging powers with have 5 percentage point shift in IMF voting

G20 is to take on an expanded role as part of a historic shift that recognises the rising influence of China, Brazil and India. The leaders of the world's top 20 wealthy and developing nations decided that the G20 will take over the role of pre-eminent council on global economic cooperation, a function that for more than three decades had been performed by a smaller club of leading industrial countries known as the G8.

The G8 will continue to meet on matters of common importance such as national security.

G20 also agreed on a 5 percentage point shift in International Monetary Fund voting power from controlling developed countries to underrepresented countries, G20 sources said. The move is part of efforts to give emerging economic powers more say in the IMF to recognize their growing influence in the world economy.

World leaders closed in on a statement urging new restraints on bankers' pay, a flashpoint for outrage in the global financial crisis. The statement, however, was not expected to include specific monetary caps on pay, accommodating the United States' insistence that such limits would be a deal-breaker.

G20 policy experts are urging their leaders to approve measures such as clawing back salaries for poor performance and paying some bonuses in stock, an official said.

High levels of compensation, such as giving multi-million dollar bonuses to executives even at money-losing financial firms, have outraged political leaders and become a target for advocates of tighter oversight of banks and capital markets.

“Europeans are horrified by banks, some reliant on taxpayers' money, once again paying exorbitant bonuses,” said European Commission President Jose Manuel Barroso.

“In Pittsburgh, the EU will call for coordinated action to stop this, building on measures already taken in Europe and elsewhere,” he said in a statement before the summit opened.

A storm of controversy erupted in March over millions of dollars in bonuses paid to executives at bailed out insurance giant American International Group, prompting President Barack Obama to call out-sized bonuses “just not acceptable.”

Wall Street giant Goldman Sachs further inflamed the issue in July by saying it had set aside 11.3 billion USD for compensation in the first half of 2009, just months after getting a 10-billion taxpayer bailout, which it has since paid back.

G20 officials were focused on finding ways to link a bank's bonus pool and executive compensation more closely to the health of its balance sheet and overall profitability.