30 January 2012
A row has been brewing over the last two or three days concerning the amount of bonus it was proposed paying to the head of the Royal Bank Of Scotland. (RBS) Some readers may recall that during the great bank collapse, a couple of years ago, the government had to step in and save the bank by injecting vast sums of money into it and as a result ended up owning 81%. In effect, we the taxpayers, own this 81%. Year after year, there’s been a storm of protest over the grotesque amounts of money being given to bankers by way of bonuses even in cases where they have lost money, usually on the grounds that the losses would have been far greater had the governance of the bank not been so skilful .
The government has been under great pressure to bring in some form of regulation on the size of these bonuses, some of which can run into tens of millions of pounds but in a free market it is extremely difficult to see how this can be done effectively without damaging London as one of the leading financial centres of the world. For example, if we capped the amount of earnings and all bonuses received by the top people, you can imagine that they could immediately move the whole show to a country where such restrictions did not prevail.
Quite simply, our banks must be competitive with the other world markets and unless there was a universal agreement – which I doubt could ever be achieved – then the remuneration of these top people must be left to float to find its own level.
In a case like RSB, which, as I say, is owned by the taxpayer, there is some excuse for imposing a cap on overall earnings and probably getting away with it. The Chancellor of the Exchequer made it quite clear, to the relatively new chairman of RSB, Mr Heston, that he expected his bonus this year to be well under £1 million (last year it was over £2 million) . In the event the remuneration committee settled on the figure of £963,000 . (Not exactly what you would call ‘well under £1 million!). Anyway, leaving the amount aside, the howl of protest from the public since it was announced, has eventually shamed the chairman into declining to accept the bonus. I cannot feel too sorry for him as he is entitled, under his contract, to millions more in shares, almost whatever happens to RSB, such is the nature of the beast in banking.
It is also being proposed that ‘workers’ should also sit on the remuneration committee and in doing so, bring some sense into the whole process and thus moderating the amounts being awarded. It has been suggested that no employee, however senior, should earn more than 40 times the lowest paid worker which would restrict the CEOs salary to roughly £1 million. However, this has yet to be fully debated to see if it could possibly be implemented.
The immorality of these vast sums of money paid to the so-called bankers or the streetwise traders on the trading floors, have been the subject of dissension for many years, particularly as a number of these so-called traders are not particularly well educated and are little better than barrow boys who happened to be extremely numerate.
This brings me onto the parallel situation concerning footballers. Here we have another group of people, almost to a man, uneducated, who could scarcely hold a job down stacking shelves in the supermarket, but who have some skill in dribbling and kicking a football. Their salaries, or wages, are certainly grotesque, running into the millions, in some instances, in comparison with their peer group holding down ordinary jobs I have not heard one single criticism about these levels of income, from political parties of any persuasion, as I believe it would be political suicide to criticise them. The Labour Party, in particular, rely heavily on the working man’s vote and as half the country is football mad, to attack the amount of money their heroes receive, would almost certainly affect their standing in the polls.
I’m certainly in favour of capping anybody’s income to a reasonable level, and even £1 million a year is far beyond the dreams of avarice, for most people, it should apply to city workers as well as footballers. On a personal front, when I started in the City, 61 years ago, I was paid £2.50 p per week and I recall the at most senior member of staff achieving the magic £1000 per year and how we all went down at lunchtime to view his second hand Morris Minor and drink his health. So far as we were concerned he had made it but I can assure my readers that there is no green eyed monster here, I’m not in any way, of envious, of today’s people who are able to earn more put in one year, then I have in my 60 odd years as a professionally qualified man.
But I do know this. That unless governments throughout the leading countries of the world can come to some sort of agreement on these ludicrously high incomes there will be some serious backlash against it sooner rather than later.
Given the problems that the government are facing over trying to control the level of bonuses they must feel desperately frustrated. Click here to see a cat who is also frustrated!