Let's agree on one thing right away: the bonus culture at big banks, in the UK and worldwide, is out of control. Receiving an annual bonus, almost regardless of how the firm has done or how any particular individual has performed, has taken on a quasi-sacramental significance.
In the late 1990s, during a somewhat testing time for financial markets, all of the senior staff at my firm were "asked" to agree to salary cuts of between 5 and 15%, to help the bank to keep costs under control. For those of us working in London at the time, this was of course a direct breach of labour law, but it would have been a career limiting move not to comply. A few months into this wage rollback, bonus time came around....and the firm duly paid out the usual substantial bonuses, far exceeding the scale of the wage reductions. Go figure. The bonus ritual must be observed, come what may.
All of that said, the past few days of frenzy over the £960,000 bonus awarded to RBS boss Stephen Hester, which culminated last evening in Hester's decision not to accept the award, has been little short of nauseating. The media have splashed around large-type headlines about "public fury", but how do they know that? This story only emerged late last week, so there has been no opportunity for anyone actually to gauge the public mood. No, this whole bogus scandal has been concocted by high-profile media commentators and seized on by opportunistic politicians. If there is now "public fury", it's because this unholy alliance wanted it.
Stephen Hester was hired to sort out an almighty mess left at RBS by the previous regime, a regime headed by a man (Fred Goodwin) to whom the Labour government saw fit to award a knighthood, and whose punishment for bankrupting the institution has been retirement on an astronomical pension. By all accounts, Hester is doing a good job, which is just as well considering that the taxpayers still have £45 billion in capital at risk in the bank. His most vociferous attackers in the media doubtless all earn massive multiples of the average wage -- though of course they would never see fit to disclose that fact -- while taking on far less responsibility.
As for the politicians, words almost fail me. But only almost. Here we have a group of people on big salaries and with generous expense accounts, who all qualify for inflation-indexed pensions after just a few years in the job, pontificating about how much someone should be paid for a job most of them could never understand, much less carry out.
It's hard to know who looks worse here. Is it David Cameron, who has alternated between (a) saying that Hester's bonus is a matter only for the board of RBS to decide, and (b) trying to claim credit for the fact that the payout is less than it was last year? Or is it Ed Miliband and the opposition front bench, who have had the sheer gall to decry Hester's bonus as a reward for failure. Hell, guys, you'd know about that, wouldn't you? Your government may not have been the parents of the financial crisis, but you were surely the midwives. Your reward for that appalling failure was to get re-elected to the lucrative bully pulpit for another term.
In the end, it's probably Cameron who looks worse. He's only just finished telling everyone how he supports a new, less greedy approach to capitalism, and his Cabinet colleague Vince Cable has just unveiled detailed plans to curb "excessive" executive pay. Reports that Stephen Hester could actually have claimed an even larger bonus under his contract suggest that the RBS board was trying to go along with that zeitgeist -- and its reward is the witch-hunt we have seen this past weekend. David Cameron may have breathed a sigh of relief when Hester turned down his bonus, but now that the dogs of war have been let slip, that relief is unlikely to last very long.
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