Martin Flanagan: Why Planet Normal must rein in the rhetoric

Published on Thursday 9 February 2012 00:00

EVEN if they are both from Planet Banker, there is something blatantly unsavoury about the recent bout of controversy and finger-pointing around Royal Bank of Scotland boss Stephen Hester and his predecessor Fred Goodwin.

With Hester it has been about his bonus, with Goodwin his knighthood, the former relinquished, the latter revoked. At times it has resembled the Salem witch trials. He’s a banker, kill him.

The “outrage” has also seemed contrived. Politicians trying to score points off each other in a holier-than-thou banking clampdown that has served as a useful lightning rod to divert attention from more authentic and widespread economic pain for millions.

Hester admitted yesterday he considered resigning amid the furore over his near-£1 million bonus for last year, and that he is not a “robot” immune to personal attacks.

It is a fair point for the RBS man to make as he continues his massive job of turning around the distressed legacy of the Goodwin years and make part-nationalised RBS a bank safe enough to return to the private sector.

To suggest the attacks on the pair have been unedifying political populism is not to be in the pocket of the banking industry.

A very significant slice of the industry was guilty of greed and incompetence that triggered a financial crisis, which, in turn, helped trigger a widespread recession.

And bankers have been disingenuous about a bonus system that has looked a rigged deck in favour of payouts whatever the banking weather (lose on the annual carousel, gain on the long-term investment plan, lose on the LTIPs, gain on the basic salary, do pass Go, do collect the readies).

And a distasteful sense of entitlement still walks many banking corridors. Special pleading is often the industry’s default position.

But if we are all to get out of this chronic economic downturn and create some sort of future for the one in five young people watching daytime telly then banks have to be profitable and lending again.

They are wealth generators, and that takes managerial talent to unleash. I have talked to nobody in the City, banking analysts, fund managers or whoever, who think Hester has made anything other than a demonstrably solid start halfway through his five-year strategy to turn RBS around.

He has flogged billions of pounds of assets to help make the Royal a simpler, safer bank with a stronger balance sheet and more robust capital cushions. You may argue whether now was quite the time to take a bonus when Hester himself says there is still a long way to go, but neither could it conceivably be called a reward for failure.

In short, it was a reward for progress towards a goal, not the achievement of a goal. Debate, fine, but the political and media grandstanding just had a perfunctory feel to it this time round?

And to hyperventilate because RBS’s share price is still nowhere near where the taxpayer bought in? Whatever happened to the argument that bonuses should not be solely tied to share price because that can be sometimes manipulated through short-termism?

Similarly, it is clear Goodwin ran RBS into the ground. And his lengthy negotiations about munificent pension entitlement after doing so showed cloth-eared antennae, or scant sympathy, for the wider public mood.

But he has never been found guilty of any criminal offence or accused by regulators of lack of integrity. Stripping him of what had become a diminished overcoat of a knighthood anyway looked politically petty and a ritualistic humiliation too far. Just like with the War of Hester’s Bonus, we need to judge each banker “case” on its merits rather than let a demented bandwagon develop. Otherwise we on Planet Normal risk being as unreasonable as many bankers were unhinged.

Just off to Rumea for some Powerbrands…

BEWARE business people being left alone in a room with buzzwords and marketing bods. Reckitt Benckiser’s new boss Rakesh Kapoor has come up with “Powerbrands” and “Powermarkets”.

On a roll, he has defined one new geographic focus as “Rumea”, which sounds appropriately enough like a toilet cleaner and is meant to embrace the likes of Russia, the Middle East and Africa. And, in future, Reckitt will refer to Europe and North America together as ENA. Let’s hope the grandiose nomenclature drives more sales of Dettol and Nurofen.

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The ghost of Sir William Arrol

Thursday, February 9, 2012 at 01:19 PM

The suggestion that the banking creates wealth is completely without foundation. If that was the case we'd be able to prosper with an economy comprising only of banks, where all that happened was that banks loaned money to each other and they all make a profit. Not! Banks cream off the wealth created by other sectors of the economy, or more recently the taxpayer. I'm of the opinion that they actually stifle economic growth. The many tens of £ billion sucked up to turn around RBS could have built a lot of tram lines or a good chunk of high speed rail between Edinburgh and London.

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