Stephen hester bonus
With characteristic tact, the BBC's Robert Peston made a headhunter's pitch on behalf of Stephen Hester, the riches-to-rags chief executive of RBS, in the wake of his non-bonus this morning.
He's a very smart fellow and rival banks may smell an opportunity in the current row, so "if an attractive offer came along he might be tempted to take it," Pesto told Radio 4 listeners.
Thanks for that insight, Robert. It inadvertently sheds light on the morality of the investment banking community, which makes Premier League football look comparatively wholesome.
Actually, it's a good day for democracy, more precisely for open and accountable government and more accountable business – one in which the shareholders in an enterprise (in the case of RBS, that's 80% us) take a rare chance to assert themselves against the executives who manage their/our assets and extract exorbitant rewards in return for doing so.
The cult of the Superman CEO is a problem – those soaring pay ratios – in Britain and the US, more than in rival economies I think. It's got out of hand and it's wrong. Slowly, painfully, we are collectively doing something about it.
Call it stone-throwing populism if you like, but populist responses are not always wrong and sometimes save out-of-touch elites from something nastier than a pay cut.
So the day may be in sight when we will look back on the excesses of the past two decades and wonder why they got away with it for so long.
After all, they're not risking their own money, much of what they do is posh gambling with limited wider utility. Plenty of other people could do it – trust me, they really could – and the bankers don't yet seem to grasp how much pain and suffering their miscalculations have caused to millions.
They've not been great at all that promised lending either. One minute they're offering credit cards to babies, the next refusing it to firms with prospects. They pay themselves handsomely even when they screw up.
None of which is to say that a sophisticated banking system with access to huge funds and plentiful liquidity is not of potential benefit to us all – even if we don't realise it – and has contributed to the alleviation of poverty around the world on a quite unprecedented scale, something the gloomsters tend to overlook.
But success bred recklessness, innovation gave way to folly and greed: the system crashed and has triggered what is looking like the most significant recession since the 1930s.
In the wider context, Hester's pay packet is a very small detail, but it's worth spelling out. On top of his £1.2m salary – fair enough in such a demanding job, I'll say to show goodwill – he was due a bonus of £963,000 (halved from the initial proposal) now forgone as a result of Ed Miliband's threat to put it to a Commons vote.
A non-cash bonus point for Labour? Maybe. David Cameron couldn't whip his own side to vote Yes to the Hester millions and the Lib Dems would have joined Labour in large enough numbers to ensure defeat. What would Vince Cable, would-be reformer of remuneration committees, have done? Good question.
But it's probably wiser to keep the cava on ice, waiting to see if the BBC's business editor can find Hester another job. Labour's parliamentary tactics may not look so smart then, though ministers also piled on the pressure in public – even more so in private, I suspect.
As for Hester's boss, RBS chairman, Sir Philip Hampton, he had also undercut his position by waiving his own £1.4m bonus.
But the disputed £963k is not all that's at issue. Between 2008, when Hester joined the stricken bank and 2014 he might have earned up to £39m in pay, bonuses (£3.3m has been set aside for next year) and those all-important share options which would start paying out after 2014 provided RBS met certain performance targets.
I would be happy with a fat payoff and a couple of knighthoods if Hester delivered. But reviving RBS in ever-tougher times is proving to be harder than it once looked. So it's a big "if".
RBS's share price has halved this past year – despite all those sackings and restructuring – and it looks like remaining a state-owned banks for years.
A pity that, because, as Nils Pratley explains, this weekend's drama shows that a nationalised bank sits uneasily in the predatory City of London.
It's now being said that ministers made a tactical mistake in trying to get the Hester row over early, they should have waited until Barclays' Bob Diamond got his bonus which will – we're told – make Hester's bung look puritanical.
As it is, Hester's got the worst of all worlds, no bonus and no credit for not taking it. The row isn't over either because a whole raft of bonuses for traders – they're the blokes who actually do the gambling – and other RBS luminaries including John Hourican, its investment chief who's been doing much of the sacking, are due to emerge in the next few weeks. Politicians who have now got the scent of blood will want more.
It will be an unedifying spectacle, as usual, but at least this is a matter of substance, unlike Sir Fred Goodwin's knighthood which is trivia.
And the sight of ministers trying to blame the Labour government for Hester's contractual rights – RBS bonus payments were actually discretionary – is even more unedifying than Labour blaming it all on Cameron's "feeble" (Miliband's word) performance on the City reform agenda.
The coalition's £2,000 cap on cash payments is also misleading, as shares are what this is about.
But whoever was in government would be faced with awkward choices. We don't want footloose international bankers to take us for granted and we don't really believe their threats to decamp to Zurich – few have. Nor do we want to drive them away when financial services remain a large, lucrative chunk of the UK economy.
If we could make more money from labour-intensive widget production I'd be for it, but the widget market's located in the far east now where they're not yet paying minimum wage.
Hester would be only human – they are human, that's why they're greedy – if he wasn't feeling sore about all this. After all, the last time he was headhunted, to take the RBS job, it was by Gordon Brown, the very kind of politician now throwing bricks his way.
In a sense Hester is no more than a well-greased cog in a system which not only pays top executives very well in both public and private sectors (anyone who's not elected can join the party), but feels the need to pay them bonuses and other benefits merely for doing their job half-competently.
That's wrong too. In thinking he could – and should – take his bonus Hester exercised poor judgment which has undermined public confidence during severe austerity. For that alone he showed he didn't deserve it.
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