Dani Garavelli: Wanted - a banker who brings sense of duty to job
And I admit I was wrong-footed by his comments for a while. Did the lack of a degree in this field mean I was unqualified, even naive, to suggest we were being pushed into an unnecessary (and, as it turned out, probably illegal) war?
There’s a lot of this kind of wrong-footing going on around bankers’ bonuses at the moment. Those who are intimately acquainted with the workings of the financial system (ie. those with a vested interest) are using their insider status to imply that if only us plebs were a bit more knowledgable, if only we had a greater insight into market forces, we’d recognise that not only does RBS chief executive Stephen Hester deserve his £963,000 bonus in shares, he’s probably a little bit hard done by.
Hester didn’t meet all his targets. Share prices have fallen and lending hasn’t been as high as was hoped, but it wasn’t his fault, they say. It was all down to the crisis in the Eurozone. And if the Oxford graduate and former chair of the Tory Reform Group hadn’t been paid his “due”, he might well have walked, and that would have cost the taxpayer more in the long run.
It’s difficult to argue against such voices because they are so credible. It is clearly true that banking is a competitive business and bankers – to whom the concept of doing a job to the best of your ability simply because that’s what you’re paid for is as alien as the idea that you might make do with just one house – are so conditioned to expect massive bonuses, they feel cheated if they don’t get them. It is also true that when other banks announce their chief executives’ bonuses, Hester’s will probably pale into insignificance.
Yet in the middle of all this verbiage, there are two unassailable facts those of us who continue to argue against obscene payouts can cling to: 1) Prior to the economic crisis, seven-figure bonuses were seen as essential to attract the “highest calibre” of bankers to first-rate institutions; and 2) Several of those banks were driven to the brink of collapse by recklessness and incompetence.
Hester, as we are frequently reminded, was not part of all that. Back then this high-flier, so crucial to the future of RBS, was the chief executive of British Land, where – just eight months before the slump – he demonstrated his prescience with the words: “I don’t believe we are about to see a market decline, but the period of sharp growth is over.”
Despite this, those in the know – the same people who go on about market forces – insist he has made a good fist of managing failure, and that his bonus was locked into the contract he signed under the Labour government.
But if shareholders at privately owned Cairn Energy could decide to strip chief executive Bill Gammell of his £2.5 million bonus for pulling off a £3.5 billion sale, then why couldn’t the government, which owns 83 per cent of RBS, lay down the law on Hester’s? Last week – after being put on the spot by Lord Myners, the former Labour Treasury minister who negotiated the contracts with the new state-controlled banks – Downing Street admitted it could have blocked the payment. And if it could have done so, then it should have, not only because it is ridiculous that a bank which had to be rescued using the public purse, and is still shedding jobs, should act as if it were awash with cash, but also because doing so would have fired the starting gun in its recently announced crackdown on executive pay.
Instead, the government has tried to divert attention to a two-bit sideshow – the attempt to strip Fred Goodwin of his knighthood, as if divesting of him of the title could leave him any more discredited in the eyes of the public.
However much his conduct may stick in the craw, Fred the Shred is in the past; it is reshaping our financial institutions (and revolutionising the banking culture) that’s important now. That and a reassessment of what high-calibre means. Perhaps tackling large bonuses will usher in a new breed of banker. Out will go those with obvious flair, the ones prepared to risk other people’s money for high stakes, the ones who, every now and again, will pull the kind of masterstroke that leaves the city awestruck; in will come a more conservative, cautious bunch, as unlikely to dazzle with their brilliance as to leave a trail of destruction in their wake. There are worse things you can be than boring. Indeed isn’t that exactly what this age of austerity requires? Some really dull bankers whose lack of imagination or daring is more than compensated for by their sense of social responsibility.
Though Hester himself seems unlikely to follow the example set by Antonio Horta-Osorio, the chief executive of Lloyds and apparently that of his own chairman Sir Philip Hampton, and forego his bonus, I refuse to believe there’s no-one out there who combines talent with a sense of civic duty; someone steady for whom the incentive for rescuing RBS from the jaws of disaster would be neither the massive bonus nor the title, but a more than healthy take-home pay and the satisfaction of performing a public service.