Analysis: Symbol of banking’s greed or modest motivational tool?

THE defenders of Stephen Hester tell us that a huge bonus on top of a £1.2 million pay packet isn’t about greed – rather, it is about motivation.

Other, less valued, public service workers find the psychology of motivation being applied to them is in stark contrast to that applied to those who took our economy to the brink of destruction.

The 165,000 RBS “shareholders” in Scotland who are members of Unison are expected to deliver better results while their wages are frozen or cut, and inflation eats away at their pay packet.

They are expected to forego the luxury of motivation – while others have the motivation of luxury.

Take the staff at Quarriers for example, a dedicated workforce providing care and support for some of Scotland’s most troubled children and vulnerable adults.

The staff of this social care charity are being forced, through cutbacks by no means unconnected with the activities of the bankers, into accepting pay cuts of up 17 per cent. This from a starting point of earning less in a year than Mr Hester earns in a week. This isn’t a system that can be described as fair or just – or even efficient.

Of course Mr Hester is merely behaving as his peers do. But the fact is, they are also greedy and two wrongs don’t make a right, even if they are securitised and sold on the derivatives market. We are told by City apologists, that in banking (unlike in caring professions) that we must pay millions of pounds to attract the top talent.

This is something not noticed by the head of the Industrial and Commercial Bank of China, the world’s biggest bank. Their chief executive, Jiang Jianqing, is paid, in Hesterian terms, a mere pittance of £95,000. Perhaps pandas aren’t the only things we should be looking to bring across from China.

But while the greed at the top of the banking industry is unrestrained, it is far from unrestrainable. A Robin Hood Tax on large financial transactions would damp down speculative activity and raise money for the government.

A serious effort at tackling tax avoidance would also raise money that could be put to use providing public services.

And adopting the High Pay Commission recommendations would put some of the fairness the Prime Minister likes to talk about back into the boardroom.

For all that people are rightly angry at Stephen Hester, he is in truth only the symptom of a wider problem, which is the domination of our economy and politics by a financial sector heedless of any wider social responsibility.

• Dave Watson is head of bargaining and campaigns at Unison Scotland

YES

STEPHEN Hester was not responsible for the mess that RBS got itself into. Indeed, he was not even a banker at the time it happened – he was the well-respected chief executive of a large property company.

But his track record as a banker in earlier years, coupled with being untainted by the credit crunch, led to him being invited to become a non-executive board member at Northern Rock and RBS, and then to take the top job at RBS.

Not many people would want that job. Company turnarounds are not easy at the best of times. The job Mr Hester was brought in to do – “de-risk” the bank, restore it to profitability, sell off parts of it – is a complex one, made more difficult by the fact that the public own it, and so politicians and the media take a close interest in every move.

In recent days it has been argued that because we own RBS, Stephen Hester is a public servant and as such should be on a salary much lower than his £1.2 million, with no bonus. Public sector employees all over the country have faced huge pain; so should he.

While I appreciate the emotional appeal of this argument, I think it’s a bit disingenuous. He wasn’t employed as a public sector worker, he was employed as a banker. He agreed a contract at a certain level of salary, and with the possibility of a bonus.

And whereas we wage-slaves might gasp at the size of the numbers being discussed, in the world of bankers they are relatively low. Set in the context of a world where the chief executive of Barclays got a bonus of more than £6m last year (with more rumoured for this year); where the chief executive of Lloyds would have been in line for bonuses of about £2m (after a leave of absence due to ill heath, he waived it), the RBS bonus (surely kept below £1m for political reasons) is not extraordinary.

There have been calls for Mr Hester to waive the bonus or give it to charity. Well, he chose to waive his 2009 bonus, which would have been in excess of £1m. As to giving it to charity – what he does with the money is his business.

Also, everyone is speaking of this £963,000 bonus as if it will be piled up on his desk in crisp fivers. That’s not the case. He has been awarded 1.6 million shares which, at yesterday’s price, were worth about £963,000. What he actually gets will depend on the share price in 2014, which is the earliest he can cash them in.

I hope that by 2014 Mr Hester’s bonus is worth a couple of million pounds. That would mean the share price will have recovered enough to repay the taxpayer what we invested. And that can only be a good thing.

• Dr Ruth Bender is a reader in finance and accounting at Cranfield School of Management