So, once again our nasty government shows its true colours. Cuts to the welfare budget and wage freezes for public service workers, yet carte blanche for the bosses of our banks. Despite promises to do something about the obscene bonus system and despite all these false, hypocritical claims that “we” are all in it together. Clearly someone forgot to tell the bankers. What makes all this even more galling is that in this case the government could and still can, do something about it. After all “we” the citizens own two of our major banking groups - the Royal and Lloyds.
So here is a little suggestion for Messrs Cameron, Clegg and Osborne. Why not simply impose a new regime for these two banks. No bonuses and bring down the (already excessive) salaries of the top management of these two banks. Now this is not just a matter of justice - ie if we are all in it together, then this is one way of ensuring this. No, this measure would bring about a real measure of competition into the closed and oh so cozy world of finance.
For in effect we would have a four year or more experiment the remaining lifetime of the current parliament. We are constantly bombarded by the very high earners that they need to get paid all this money because it is a competitive and global industry. Of course no evidence for this has ever been produced. Well, under this proposal we would get the evidence. If, despite the lack of bonuses and the lowering of salaries for top management, the Royal and Lloyds still managed to attract good staff and perform well, then the argument in favour of all these high bonuses and salaries would have been proved to be illusory. Of course it is possible that these two banks do not do as well as the others. That’s why the government should embrace this idea with gusto. After all anything which promotes competition is good in their eyes. At the very least it would save us some money - in all these bonuses forgone.
However I would doubt that these banks would not be able to attract good experienced staff. Precisely because it is a global industry! We do not even have to rely on the English speaking world - large though that is. After all the language of the world of finance and banking is English. These two banks can select ambitious yet experienced staff from all over the world. All keen to develop their own talents and most importantly to show that they can make a difference. Sure they want to earn lots of money, but not necessarily the obscene amounts that are now on offer.
I have previously mentioned the example of Stephen Hester, the current chief executive of the Royal Banking Group. He was appointed on an annual salary of £1.2 million. On top of which he is entitled to annual bonuses of up to £2 million, plus further bonuses in shares. Now let us just focus on the annual salary. Before he took on the Royal job, Hester was chief executive of British Land on an annual salary of £400,000. At the Royal his salary has tripled. Now as I have argued before, does Mr Hester now work three times as hard? What level of salary would have tempted Mr Hester to leave the relative obscurity of British Land to lead a great international company? I have always suspected that for the vast majority of people the thrill and challenge of such a post is in large measure reward in itself. Sure they would expect to earn more, but surely not three times their previous earnings? What if Mr Hester had been offered an annual salary of £600,000 - would he have refused the offer?
Well under my suggestion we would at least find that out. Mr Hester could be asked to continue in his post, but on a much reduced salary, minus bonuses (after all “we” are all in this together, aren’t we?). He could always say no and walk away. He will by now of course be a rather rich fellow. But if he wanted another similar job, where would he get it? And if he did go, I am sure there are plenty of ambitious and experienced men and women who would love the chance to run the Royal Banking Group. The same applies of course to Lloyds Banking Group - the other state owned bank.
So why not Messrs Cameron, Clegg and Osborne? After all this is something you can actually do - you have the power. It would almost certainly be a very popular decision. It might even convince some doubters that we are all in this together. Of course the downside is that it might actually work. That really would annoy a lot of people in the UK’s boardrooms.