Phoney Outrage at RBS bonus

Hypocrisy knows no depths at the (still yet to apologise) Labour Party.

It was Gordon (I have ended Boom and Bust) Brown and Alistair Darling who brought in Stephen Hester to be the CEO of RBS, in succession to the Labour-honoured but then disgraced, Sir Fred Goodwin.

It was these two who agreed and signed off on the compensation package for Hester.

Now we have cheap point scoring by Ed Miliband and his jolly band of overpaid media supporters saying it is a 'disgrace' and the government should intervene, etc..  I won't go into Labour's complete lack of success whenever it 'intervenes' as that would take toooo long. 

However, it is interesting to see only politicos, and most (all??) of those never having held down a real job, criticising the payout.  I guess their lack of understanding of contractual matters is to be expected - they seem to be pathologically unable to keep their election promises, after all.


My advice to Stephen Hester - tell the board that 'no, I want my full contractual entitlement, £1.6 million or thereabouts,  I want it in cash, oh and given the unprofessional way that you and the major shareholder handle bank affairs and most particularly my confidential compensation issues, I consider that I have been constructively dismissed - see you at the tribunal, where I will seek full compensation!'

Then Vince and George can figure out how they will get any banker of stature to take on the poisoned chalice that is RBS CEO and while they ponder, watch the share price of RBS spiral downwards and with it the taxpayer's 'investment'.

As you would expect with politicians, hypocrisy is leaking from Labour and finding a home with Lib Dem Jeremy Browne.  He talks of

"There's a question of honour. Even if there's a contractual opportunity for him to have a bonus it doesn't mean he has to accept it."

And exactly what is teh question of honour?

Mr Browne said Mr Hester was paid more in three days than a soldier serving in Afghanistan received in a year.
"He should reflect on that. He is effectively a public servant in a bank which is almost completely owned by us the taxpayers," he said.
"He needs to think like a public servant who has a duty to his country, not just his own wealth." 

Are we also going to see all Premier League footballers having their compensation packages attacked, as well?  What about newsreaders, the Director General of the biased BBC? union leaders like Brendan Barber and Bob Crowe? GPs and Council Leaderss?  Maybe fatous MPs and junior ministers?
 
AS for Boris - well he has an election coming up.  I think he will come to regret his short term opportunistic sound bite.  As an aside, I really can't understand what he is doing in Davos though.  Same applies to Ed M.

Private sector pay

We are just entering the period when financial institutions declare their 2011 corporate earnings and in many cases the 'bonus pool' that will be shared among their employees.

Following the bail-out of RBS, Lloyds and HBOS, the retail and investment banks now fall into two camps.  Part state-owned (see earlier) and those others institutions such as HSBC, Barclays JP Morgan, CitiCorp and Goldman Sachs, which received zero bail-out funding from the UK government  - we will call these latter type - private institutions.

We can expect lots of the usual froth from commentators about 'excessive' bank bonuses and how the 'government ought to do something about it'.

So what can the government do?

Well in the case of the part state-owned RBS, Lloyds and HBOS, they can use the shareholdings, that they hold on behalf of the UK people, to limit the amounts of payouts.  These could be limited to those that are required to meet contractual obligations - some people have bonuses built into their contracts of employment and if they meet certain targets, then legally, these must be paid - and they can then limit other payouts to zero or to certain pay grades etc., however, they and the other shareholders see fit.

In the case of the private institutions, it is really none of the business of government to interfere in how the shareholders (otherwise known as owners) spend the income of their company.

If the government wants to affect such private sector bonus payouts, it could do so through the tax system (as I have proposed, on an earlier blog) but it cannot and should not dictate to private companies on the remuneration that they give to any of their workers.

If the government wants to set the tone around pay restraint, then maybe they should concentrate on the areas which are within its span of control................

So, set a cap on the pay of anyone employed by a public organisation.  So local authority executives, civil servants, military chiefs, ministers, BBC executives, etc.  My suggestion would be around  £100,000 per year.  Many private sector companies have re-organisations and require personnel to re-apply for their role, so do the same with all of the above - get them to re-apply for their job but at a reduced rate of maximum £100,000.  Oh, and let's make the maximum include taxpayer contributions to pension funds.

That might start to sound a little more like 'we are all in this together' in action!