RBS weren't bailed out by the taxpayer under Hesters stewardship - how long is it justified castigating him for another mans failings when he's trying to help?
How long is it fair to shift the goalposts and have a witchhunt because he might take what his contract offered him for agreed performance?
I wasn't saying you wereOriginally Posted by Biscuit
I was making the point that the media has dramatised the renumeration of an individual in-line with the agreed terms of his contract, already considerably below the market rate for his role, and used public opinion to force him into giving up the bonus. Where the same public are quite comfortable with footballers demanding multiples of what the banker would get and get away with paying little to no tax. Not using as an argument just finding amusement with the hypocrisy of it all - if Wayne Rooney paid tax it would pay for two bank heads with bonus
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Has Cameron actually gone on record saying he should give it back?? I thought half the storm was over the fact that no one in the Government has really commented, beyond Ian Duncan Smith, who gave what appeared to be a personal opinion.
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This is bunny and friends. He is fed up waiting for everyone to help him out, and decided to help himself instead!
I'm in two minds about this, on the one hand if it's contractually agreed and representative of the industry as a whole, and the agreement is based on legitimate and worthy conditions indicating overall improvement, then yes, they should be paid.
On the other hand, I really really have a hard time justifying any wage much above 250k/yr in any profession, period. I've heard all the argumements "they get paid for the responsibility", "the work is complicated / specialised / critical decision making" etc, and yes that's all probably true and so they are justified a higher income. But an income 50x the national average (assuming 25k average, compared to 1.25m for example, and that's before bonus) is taking the ****, no-one, absolutely no-one deserves a wage so ludicrously out of proportion to the average man.
If you think they have a hard job, how about a binman who starts at 5am every morning come rain or shine, snow or heat....laborious physical work on your feet all day. It's not complicated but it's physically tiring work as are many manufacturing jobs.
I hate the excuse they have to deal with the stress and responsibility of a high level position as some kind of justification. It's all qualitative for sure, but anyone with half a brain cell can see the massive social injustice in the difference of these ultra high paid jobs.
I'm also sick of the argument that this money going to the mega rich somehow has a trickle down effect into the rest of the economy. Yes it does have an effect, but I can tell you what would have an even greater and more immediate effect - capping their wages, why? Well where is the money going if not into their personal bank accounts:
In the case of a private limited company it can either be distributed to the employees, or be invested in expanding the company
In the case of a public limited company, the money would be distributed to the shareholders (i.e. the public at large) and would be spend as the public sees fit, instead of having to have some kind of trickle down economy effectively living on the crumbs of the filthy rich.
Please, pick my ideas to pieces I'd love to find any reasonable flaws in them.
The problem is you're observing a symptom. Why is this guy paid so much? Because there aren't many people who've the track record or experiance, the demand outstrips supply.
It's then simple economic theory (and a good pratice) that the limited supply goes to where the demand is greatest.
Ergo these people get paid shedloads! But rather than the press which villifies someone like this man, who had done quite a good job by all accounts, which then leads him to turn down a bonus (which some say is responsible for the 3.5% drop today in RBS share prices, thats cost the tax payer a LOT more than 1M!) yet admires a footballer, we've an odd situation.
People are been paid this because we've had chronic failure of schools and society to do a demanding job, I'd also suggest that a bin man who has to get up early, has it much easier than most CEOs in terms of work demand and stress. Granted plenty of CEOs aren't able bodied enough to do the job thou.
This is what it comes down to, think a star trader is paid too much, do a quick physics phd, and beat them at the job.
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I haven't studied his pronouncements on it, but from what I remember, the tone seemed to be that he thought it would be good if he did but it's his (Hester's) decision. He certainly urged "restraint", and to take account of public mood, etc.
I called him lily-livered because he seems to be sitting on the fence. I guess that's no surprise for a politician, because they always do that unless they make a political calculation that there's a gain to be had from jumping one way or the other.
I think he ought to either have said it's unacceptable, and yes, the contract was labour;s but we're going to block it and if Hester and/or the board want to resign over it, so be it. We'll get someone else .... and not pay a bonus. Or he ought to have defended it as being within the contract Hester has, and that the job he's done is sufficient to warrant it. But he just let it hang, neither one thing nor 'tother. But at least that's better than Miliband's opportunism and hypocrisy.
Erm ... a public limited company isn't owned the the public. They can just buy shares. Usually, the bulk of the shareholdings are institutions, like pension funds.
And in a private limited company, much the same applies except the shares aren't publicly traded. But they're still owned by shareholders, but they certainly don't have to either expand the company or distribute it to employees.
Employees are just that - they do a job for an agreed remuneration. Owners might seek to incentivise (hate that word) employees with a bonus, based either on personal performance or company results, and that might be in the contract, but it's the exception not the rule for any but very senior staff to be offered shares. And the shareholders, which are usually mostly also directors in private companies) can just pocket the profits and head off to a beach in the sun, or Monte Carlo to blow it on the tables, if they so wish.
Only if it's some kind of mutual, along the lines of John Lewis, are profits distributed to employees.
But that's a pretty good model, actually, and we could do worse than do a lot more of it.
I thought you'd like a few facts ...
RBS's CEO has rejected his £960k bonus (on top of his £1.2M salary). Last year his comp (including bonus + pension) was £7.7M
RBS's Chairman has also rejected his £1.4M bonus.
The UK head of Goldman Sachs, is keeping his £1.6M bonus.
The RBS CEO (Stephen Hester) has had an exceptional career, despite his comprehensive school upbringing.CSFB's Youngest Ever MD !He joined the investment bank Credit Suisse straight from Oxford University, where he earned a first in philosophy, politics and economics, and rose swiftly through the ranks to become its youngest-ever managing director at 35.
His vice is fox hunting, not golf !
He's not the highest paid at RBS, not even close. The highest paid traders will be on a lot more than £2M !
After the facts, my opinions :-
Do I think it's good and fair that this guy earns so much ? No of course it isn't. But life isn't fair. I take heart in one small thing. Just like Wayne Rooney, at least this guy's comp is meritocratic. He earned it himself. He didn't inherit it. There is no Eton education for this guy and no millionaire father (his dad was a university professor). He studied PPE (just like David Cameron), got a 1st (just like DC) and works very hard (just like DC).
He's also got a very difficult and unpleasant job. He's currently selling off RBS's equities division. This is likely to result in 4800 job losses. Obviously those 4800 will find other jobs, but they are likely to displace 6000+ other employees (city workers are used to 60 hour weeks).
I used to be very unhappy with my low wage and envious of all the money that city types were paid .... so I got a job there. Tomorrow my alarm will go off at 5:30 and I will be at my desk by 7:20. Our systems will work and by the end of they day I will have earned my money. And if tomorrow is like today I will be home by ~7:10pm. I'm very happy with my lot. After 5 years at uni (and two degrees) I work long and hard and get paid a lot for it.
The thing I hope for, is that in a few years time, when your kids and my kids and Cameron's kids and Hester's kids all apply for the same job .... I hope the best kid gets it.
Phage (31-01-2012)
Seems to me that Banks nearly destroyed the Icelandic and Irish economies and weakened everyone else's out of greed and incompetence, followd by a period of internecine lending policies until Governments, reluctantly, were forced to take a lead. The banks were rescued on the grounds they were too big to be allowed to fail and the CEO's - no matter haow many degrees they had, or who their fathers were, or what college they went to - were impotent to do anything about it ... in fact, they didn't even understand the instruments their banks had been dealing in.
What's the difference between recovering from a failure of the banking system and paying to resuce it?
Now the banks are speculating against the euro - how many countries' debts can Germany afford to fund? And they are forcing whole countries - nay, a continent - into a new financial crisis because the politicians are too inept to see what's really wrong. And what's really wrong is that the whole financial system as it is presently structured is flawed because the financial institutions are bigger than the countries they speculate against - they own the debts and they can say who pays what, and who will be lent what. Even Germany has to raise its finance from the existing financial system and has to accept the terms the financial system is prepared to grant it. The financial system needs to be taken over, overhauled, and started afresh without the corrupting influences that sky high salaries and obscene bonuses cause. It should be replaced with a prudent system based on real wealth and real growth rather than speculation for or against the value of paper (or electronic) instruments.
On BBC2's Newsnight tonight (30/1/12) it was pointed out that RBS is 4/5ths owned by the taxpayers, and what they expected of the bank was that it become a well-run organisation, without enormous salaries being paid to staff, and providing simple banking facilities, like currnet accounts, overdrafts and savings plans. How I would love to see a return to the prudent banking style Scottish banks used to be famous for! But RBS still considers itself a "commercial" bank with every right to carry on as it did prior to 2008, and that neither the Government, nor public opinion has any right to complain or criticise. People should pay up and shut up.
If the public got its way, it is objected, there's no way RBS could be re-privatised at a profit. So what? We know that, when the Bank is refloated, the Government shares will be sold at a discount, so the City can make instant profits - whatever Cameron says. We know it will cost us, whichever way RBS is sold off. The only profits on privatisation will be for speculators. We saw this with BT and British Rail. We saw this when Thatcher stole the TSB from under our noses, and we'll see it again with RBS.
Hester has waived his bonus. Good for him. He might be contractually entitled, but not in any other way. RBS is still a "dog's breakfast", and will be for years to come! Maybe he has "got it" at last. But clearly, the rest of the Board of RBS haven't "got it" yet - they were willing to back Hester if he had taken the bonus; they obviously still want to take their own. Clearly Cameron hasn't "got it" because, despite his calls for responsible share ownership and prudent governance by boards of directors, he, as representative of 80% of RBS's shareholders did not have the bottle to say anyting more than, We'd like it if Hester said No. What a wimp!
Now I know that people say Hester commands a "market value," as do all the other high-flying bank executivess, and if RBS refuses to pay the going rate, it will not get the "best" people to take these important positions, but as someone said on Radio 4's Any Answers, "Train me up and I'll do it!" If Hester goes, there are plenty of other people who will do the job just as well, for less money, and who will guide the bank back to the sensible banking practices it used to follow. Let the current crop of City leeches go to whoever will have them, with my blessing. They will soon find they are living in a bubble and will have to work harder and harder just to survive - a fool's paradise.
So, in case anyone is in any doubt, I think no-one in RBS deserves a bonus unless (1) he has performed better than last year, (2) the bonus is no more than 10% of normal salary, subject to a maximum of (say) £5,000. They'll still be doing better than the people they have thrown out of work ... people who were not "too big to fail" but who have probably created more real wealth than futures speculators and foreign exchange dealers. My wife, for example, who has lost a third of her hours due to Government cuts and has seen her salary fall from £12,000 to £8,000.
She has never had a bonus and has no hope of receiving one, but if she didn't turn up for work one day, it would make a difference.
Last edited by MMI; 31-01-2012 at 01:28 AM.
Biscuit (31-01-2012)
In RBS's case, the public does own that particular PLC ... well, 80% of it anyway, and that's enough to control it.
I'm aware of that. I've even pointed that out earlier.
Don't my comment out of context, but look at it in the context of the remark I quoted, which wasMoney distributed to to shareholders is spent as the shareholders see fit. In this particular public limited company, the largest shareholder is the government, on our behalf. But even then, in what sense are dividends spent by what the public want? They're spent on what the government wants, and conflating the two is optimistic at best.In the case of a public limited company, the money would be distributed to the shareholders (i.e. the public at large) and would be spend as the public sees fit, instead of having to have some kind of trickle down economy effectively living on the crumbs of the filthy rich.
And in the case of RBS, what money is distributed, exactly, anyway? There has been no distribution of dividends on ordinary shares for several years (since 2008 interim payment), and will not be until the current agreement with the EU runs out, and even then, only if it can. There have been some payout on preferential shares, but as I understand it, the government, and hence public, stake in RBS is 67% of ordinary stock, with the balance made up to 82% by B stock.
And, if we're being especially fussy about it, we don't actually own RBS shares at all. UKFI owns them, and we own UKFI but, short of changing the board of UKFI (which, as it happens, I'd be in favour of, there being far too many bankers on that board), we don't even get to vote directly on their decisions as to what RBS does. That is part of the problem, and why the government don't have a direct say in bonuses .... because that's how the Labour government, for reasons that no doubt seemed sound, and probably were sound, at the time, set it up.
I'd say so far, it still works, looking at the performance to date.
Actually, that's pretty much the exact opposite of what was said on Newsnight. It didn't sound right, so I went back and watched it again. Yes, it's 4/5ths (82%, as described above) tax-payer-owned, sort-of, but it was NOT intended to be a simple retail bank. It was Allister Heath, CityAM's editor talking, and what he said, to paraphrase slightly, was 'that the only way you could run a bank as public sector, with public sector pay levels, etc, was IF you ran it as a simple, retail bank' offering that type of simple service.
He also pointed out that "maybe" that's what a lot of people want. The problem is, about £45 billion of our money was "invested" into RBS on the basis that we get it back once the bank is re-privatised, and that that type of bank is not going to sell for anything that breaks even on that £45 billion, and in my view, not for anything even close.
So, the point of the £45 billion RBS takeover was essentially to stem the tide of a possible collapse of the entire UK banking system. It was, if you like, a government firewall, because we need the types of services you mention for just about all other business, from the sole trader upward, to function.
That's why it was "too big to fail".
But, in propping it up, we had to stick that £45 billion in, and I don't know about you, but at some point, I'd like to see us get it back, preferably with a profit, but at least, without losing most of it. And that means getting the bank on a sound footing, commercially And that is precisely why it was set up at "arms length" from political interference, via UKFI.
So the first task is to prevent absolute collapse. That, so far at least, has been done. Second, the task is to rebalance and de-leverage the balance sheet. As it was, RBS had an enormous risk to investment loss that could have had vastly greater implications for the tax-payer, largely because of all that securitised debt. Well, about $600 billion of that has apparently been disposed of, and no doubt, at some loss, but at the same time, decreasing the downside risk to us. Again, a major objective.
Once the bank has recovered to the point of being commercially sellable, it can be sold and we get our money back. I can see two ways of doing that. First, sell it structured as it is now, and second, break it up and sell the investment arm. In either case, we need to get a good chunk of value from the investment arm. I'd suggest it's a tactical mistake to break it up and then sell it, not least because while it might isolate the retail arm of RBS from the risks of the investment arm, it does nothing for the rest of the industry and puts both arms of RBS at a disadvantage. Better, in my view, is to get RBS sound again, finish off the balance sheet restructuring, finish the de-leveraging, and sell it, as a commercial operation, as that's the only way we're likely to avoid a whopping haircut on that £45 billion. And, in line with Vince Cable's regular mutterings, separate risky investment banks from the fundamentally necessary retail banking needs. Just don't though away a good chunk of that £45 billion doing it.
Be aware, though, that if we separate investment and retail banking, we're likely to see an increase in the costs of retail banking. We'll probably all pay more for our bank accounts, with the upside being we're insulated from the riskier aspects of investment banking, which often go right but as we've seen, when they go wrong it can be calamitous on a monumental scale.
Anyway, back on point ... the whole reason the Labour government set up this UKFI arms-length operation was precisely to avoid having to nationalise the bank, and run it with civil servants on "normal" pay. The point was to stop it melting down, protect the rest of us in the process, keep it commercial and at arm's length, and eventually get our money back and hopefully make the taxpayer a profit in the process. You could even say it was a £45 billion investment risk, by the government, with our money. One it needed to take, in my view, but a risk nonetheless.
All depends in the performance metrics used, though, and the context, doesn't it?
RBS still exists, and hasn't imploded. That's a win. And it stopped the rot in the rest of the system, or at least, it stopped the momentum to a collapse that was building. Another win.
Sure, share prices are down, but :-
- the context is the rest of the economy, here and abroad, and
- the performance of other banks, and
- share prices are best judged over the long-term, especially in a disaster-recovery environment, and
- disposal of risk, and
- de-leveraging the balance sheet
- improvements in capital ratios
It's also worth noting the government (now, and the last one) express somewhat contradictory objectives. They say banks are too leveraged (and they are, IMHO) so reduce gearing. At the same time, lend more. HUH? It's as bit like them telling us to spend more this month, and save month this month. Love to, Mr Government, just as soon as you tell me where the money to do it comes from? And that, of course, is what the government has been subtly telling us. Save more, reduce debt. But spend more, consume, and drive the economy. Which is it, FFS.
Well as Saracen says, Hester could have said he was taking the bonus because that was what he was entitled to. Ed Miliband could have (and would have) then said that he was going to force a commons vote that, in all likelihood he would win, to stop the payment, because he was entitled to do that. If entitlement is justification for ones actions, then neither of them would have been in the wrong. And as for Miliband being decried as an opportunist or a hypocrite, show me a ‘successful’ politician that isn’t? Osborne justified the payment of the bonus by claiming it was the previous Government who agreed it, but the current Government has changed or reneged numerous agreements and contracts made by the previous one, so that is simply nonsense.
I’ve heard from numerous posters here, to justify the pay-out, that we have to pay the bonuses to the Hester;s of this world, to safeguard the taxpayers investments, because they are the best people for the job. I also read that shares in RBS fell by over 30%, so what criteria is his perceived success being measured by? It is widely accepted, and in some quarters expected, that there be a shift back to a time when more modest bonuses be paid, and even then, for exceptional performance, not just turning up. If that change is not implemented now, starting with a tax funded, bailed out bank, then when?
Just as footballers salaries are unsustainable and will come down when big clubs start going under, this has to be a watershed moment for the banking world, or at least in Britain.
Although this mess really did start the moment they part nationalised RBS. They should have either let it go to wall (surely a cornerstone of capitalism is that if you can’t pay, you go bust?), or completely nationalised it, with someone given a flat salary, very modest share bonus, and, as I read in the Telegraph, a promise of Knighthood.
Watching the posts here and other forums, the swing to the far-left is quite marked. I'd even go so far as to say reminiscent of the 30's.
The politics of envy have truly taken over, and I expect to see more and more of this unformed bile against anyone who is not an avowed member of the 'ordinary'. The problem being is that there is no clear definition of that group, other than 'Anyone who earns more than I do'.
If MMI or anyone could articulate exactly how they would implement appropriate reforms, rather than empty motherhood catchphrases, they have a real chance to effect change. People will listen and vote accordingly. When the Hypocricy of our current politicians on both sides of the aisle is stunning in it's openess, it leaves the door wide open for a well-reasoned argument and clear policies. If someone could point out a party with a real vision, then they have my vote.
(Obviously this excludes the BNP and the Communists, who have a vision, but are hateful.)
EDIT: I believe that this all started much further back than the current crisis. Most likely in the 1980s.
Society's to blame,
Or possibly Atari.
roachcoach (31-01-2012),Saracen (31-01-2012)
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