10 Comments

• David from Ealing 29th Jan '12 - 1:24pm

  Am I the only one who is concerned that so much of the discussion on this seems to be concentrating on the fact that RBS is 83% owned by the taxpayer? I can’t see the justification for such huge bonuses for anyone, whether they’re in the private sector or the public sector.

• toryboysnevergrowup 29th Jan '12 - 2:36pm

  Absolutely right David – the RBS share price fell by over a third during 2011 and it made a loss of £189m for the 9 months to 30 September 2011, so it is difficult to see how the Board could argue that they had added any value to the company and are entitled to any bonuses whatsover. Some may remember that early in 2011 I pointed out that Vince had caved on the FSA Remuneration Code – here is the proof I’m afraid.

• David from Ealing 29th Jan '12 - 6:10pm

  I can’t see the justification for this in any circumstances. £1m is a hell of a lot of money.

• Keith Browning 30th Jan '12 - 9:51am

  I worked in one of the world’s most successful industries, pharmaceuticals, for over 30 years. When I began incentive bonuses were forbidden by the code of practice, although some companies paid an annual flat rate company bonus that used to be around 3-5% of salary, paid at Xmas.

  Gradually as our industry began to be more successful there were calls for bonuses and they were introduced over the past 20 years. Typically up to 10% of salary was up for grabs, but again the Code of Practice forbad much more. There were occasionally exceptional, ‘one-offs’ but they would never exceed 15-20%.

  Many received a miniscule or zero bonus. Your salary was your reward for doing your job and the bonus was for ‘extra success’. The same system applied to the top of the company, indeed the industry, so there were no fat cats anywhere in the system.

  This was the second most successful industry after oil, so how can people (the bankers) who make nothing and ruin the lives of everyone else expect more the rest of humanity. Crazy, crazy, crazy.

  Are they saying the best people join the banking industry. I think not. I was surrounded by people of the highest intellect, and they were improving peoples lives. It would seem that banking attracts a certain type of person – greedy ones. Let them use their intellect to do a proper job.

• Richard Swales 30th Jan '12 - 11:05am

  George Osbourne says, apparently without irony, that he is glad Hester as declined his *million* and can now focus on the task of saving *billions* for the tax payer, which you all presumably see as Hester’s patriotic duty – he has already turned a 10 figure loss into a 10 figure profit. It would serve you all right if he now focuses on the task of finding a job in the private sector, leaving those billions in the hands of a second-choice candidate, but hey, you’ll have saved your 6 figure bonus.

  The difference in share price mostly reflects that the market thought he could have done even more.

• toryboysnevergrowup 30th Jan '12 - 11:25am

  “he has already turned a 10 figure loss into a 10 figure profit2

  No he hasn’t – please look at the bottom line you will find that RBS was still loss making for the 9 months to 30 September – and that was after including a £2bn+ gain arising from adjusting the fair value of RBS’s debt downwards which arose because of RBS credit downgrade during the year. Of course these people are happy to define their own measure of operating non core profit to suit their purposes – but any decent FSA code would not allow boards of directors to have any bonuses whatsoever while their banks are still making losses (on the bottom line) and destroying shareholder value. You pay people bonuseswhen they achieve results not before. What is Vince going to do to ensure that this is properly reflected in FSA and FRRP remuneration codes. Some (and I am one of them) would want to see some upper ceiling in the level of bonuses so as to discourage over risky behavior as well – it will be interesting to see what Mr Diamond gets this year given what has happened to the Barclays shareprice and the downturn in their investment banking profits.

• Richard Swales 30th Jan '12 - 12:51pm

  @tb – I have seen different sets of figures in different places. If the pessimistic ones are the right ones, then the discussion about the bonus is missing the point – he should be sacked, and someone else should be attracted to look after our billions, and we should use a 7 figure package to get someone good.

• toryboysnevergrowup 30th Jan '12 - 1:25pm

  Richard

  I looked at the actaul figures in RBS interim report for the 9 months to 30 Spetember 2011 per the investor relations section of their website – I have a deep mistrust of how financial accounts are often subject to spin doctoring that makes that of the politicians look distinctly amateurish. One of the things that allows them to get away with it is the quality of much of our financial journalists. BTW did anyone note how Peston referred to “Steve” when discussing Hester last night.

  I’m not sure that I would agree with sacking Hester – financial accounts are not the whole story, and even there things are clearly improved – I just think that the time for paying bonuses (whatever their size) is once the improvements have been fully delivered rather than being in process.

  You do have a point that good senior bank management is not cheap – but that said the overall level paid is way above what most people would consider to be moral – which is why I think there needs to be action to bring down the overall level – this needs to be done by remuneration codes, action by institutional shareholders (including pension schemes) and needs to be co-ordinated with other financial centres. This is where the Government and responsible capitalism should come in – but it clearly isn’t doing so at present.

• toryboysnevergrowup 30th Jan '12 - 1:33pm

  Keith Browning

  I wouldn’t be so blase about the pharmaceutical industry – it has its share of disasters which damage human health and fail to deliver what is promised. To say nothing of its pretty universal price fixing and monopolistic practices which have fattened margins at the expense of high bills for health services and individuals throughout the world. Look at the accounts of any major pharmaceutical company and you will usually see many pages of notes describing all the legal actions in which they are involved – no smoke without some fire I’m afraid. My guess is that the senior management of pharmaceutical companies are not far behind banks when it comes to feathering their nests – oil companies are probably ahead at present.

• Keith Browning 30th Jan '12 - 2:45pm

  I wasn’t making an attempt to defend the industry but rather the wage structure in a very succesful part of the world economy that, despite the obvious shortcomings, has transformed the health of the world in the past 60 years – vaccines, heart drugs, ulcers, contraception etc.

  Our pay structure was just the same as any other business. We received a salary and then possibly a modest bonus if sales targets and profitability levels were reached. A good bonus year might be £5000, with the average less than that.

  Why do the bankers think they can justify creating a system that is not in touch with the real world of the rest of us.