Bonus time at RBS

 

             When the government was working on a new policy for high pay and large bonuses I raised the issue of RBS. I raised it again when Dr Cable announced his policy in the Commons. People will judge the success of Dr Cable’s bid to control large bonuses in no small measure  by the government’s  success in handling RBS pay and  bonuses, where the government is the shareholder and the employer.

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88 Comments

  1. JimF
    Posted January 27, 2012 at 8:18 am | Permalink

    We now hear that the RBS board would have walked if Cameron had intervened more strongly.

    Bring it on.

    Let the business go bust like any other with only depositors protected.

    LIKE ANY OTHER BUSINESS.

    • Winston Smith
      Posted January 27, 2012 at 12:34 pm | Permalink

      Yes, as spun to the media by the Govt. An attempt to distance them from the blame and get the “useful idiots” to heap more punishment on the bankers. So much lies emanating from the political elite over this. Labour signed the contract.

  2. Gary
    Posted January 27, 2012 at 8:26 am | Permalink

    This is looting. The bank has lost over 90% of its value since the top. What are we rewarding ?

    They crashed the world economy but we are constantly told they will take their genius and go abroad if they don’t get these bonuses. We should buy them tickets and get them a taxi to the airport.

    • Bernie in Pipewell
      Posted January 27, 2012 at 4:42 pm | Permalink

      I totaly agree, even with first class tickets, it would be a lot cheaper than these so called bonuses

    • Mark
      Posted January 28, 2012 at 1:10 pm | Permalink

      At present we seem to be pursuing the ritual of punishing the innocent and rewarding the guilty. Hester was not responsible for RBS’ reckless activity, and has obviously done much to clear up after those who were. For once the BBC is a good source of what he actually has and hasn’t achieved:

      http://www.bbc.co.uk/news/business-16759963

      Perhaps we should have heard of more blood being spilled among those who were at the heart of wrecking RBS: Fred Goodwin can’t have managed to do that single handed. Part of the problem is doubtless that the guilty are the ones who know where the bodies are buried, and know that Brown’s “regulation” means they can’t be touched.

      In the mean time I see that RBS chairman Sir Philip Hampton has declined a £1.4m bonus.

  3. JimF
    Posted January 27, 2012 at 8:30 am | Permalink

    And what right have these people to put a pistol to the government’s head, the government which continues to bail out this total can of worms called RBS?

    The ramifications of this are that their public sector counterparts in whatever walk of life have impetus to do the same thing, because they know their demands will be met.

  4. Damien
    Posted January 27, 2012 at 8:39 am | Permalink

    I heard Dr Cable say that bonus of RBS bosses was “above my pay grade” and that it was accepted that the PM was responsible for this decision. This tells me that the PM has lost influence over the bank and also the bank has sent him a ‘V’ sign back. He cannot afford to lose respect in the public eye and once he does it will be hard to regain it again IMO.

    • David Price
      Posted January 27, 2012 at 9:23 am | Permalink

      I guess it depends on what was in Mr Hestors contract, wasn’t the contract written and agreed by a Labour minister in 2008? The board threatened to resign in December 2009 over bonuses, again under Labour’s watch.

      I don’t agree with the size of bonus but if bonuses are a contractual matter what do you expect the government to do, breach the contract and get sued for much more in the courts?

      In any case it needs to be made absolutely clear who is responsible for this abysmal situation – Brown, Balls etc.

      • uanime5
        Posted January 27, 2012 at 7:08 pm | Permalink

        There’s nothing in any of the contracts that says anyone at RBS has to have a bonus or how large the bonus has to be. Also it would be nearly impossible in 2008 to list the circumstances needed to obtain a bonus in 2011.

        Those who failed to stop the 2011 bonuses are Cameron and Clegg.

        • Single Acts
          Posted January 28, 2012 at 11:56 am | Permalink

          Please tell me where I can read the contract that you obviously have?

        • Mark
          Posted January 28, 2012 at 12:35 pm | Permalink

          You have copies of the contracts I take it?

        • alan jutson
          Posted January 28, 2012 at 1:23 pm | Permalink

          uanime5

          Can you tell me where I can find a copy of the contract that you have read, which outlines the terms you outline.

  5. Stewart Knight
    Posted January 27, 2012 at 8:45 am | Permalink

    Let’s get this into perspective. It isn’t a lot of money for the job being done in comparison with other people in their position. It constitutes less than a months salary, not including bonuses, for that thicko Wayne Rooney, or for some BBC presenters. It is also a package that will will mean only if shares rise will he be in a position to really benefit.

    Come back to the real world and stop taking notice of the ranting headlines of Labour and their union paymasters who are not interested in the wages, the people, or the banks but in agitation in general and making trouble.

    • A different Simon
      Posted January 27, 2012 at 9:27 am | Permalink

      I generally agree with you .

      Even though the taxpayer has pumped a huge amount of money into RBS there are reasons to suspect that their net liabilities exceeds this .

      We might still be better off turning off the lifesupport so that govt policy doesn’t have to be so skewed to protect the banks at everyone elses expense .

      We would then be able to move to positive interest rates and allow the property bubble to deflate .

      Rather than obsessing about what Steven Hester gets paid , the shareholders should be giving him clear instructions to break the banks up to ensure the best outcome and judging him on the organisations progress .

      It is pathetic that Steven Hester is getting this grief for accepting a poisoned challice of sorting out other peoples mistakes .

      • sm
        Posted January 27, 2012 at 2:15 pm | Permalink

        Couldnt the government do a’n over the weekend’ pre-pack” sell the bank to minus a lot of the contracts and onerous liabilities to probably itself. Prepacks happens all the time.

        • A different Simon
          Posted January 28, 2012 at 4:04 pm | Permalink

          There needs to be some way to purge the system of many of the synthetic instruments like synthetic credit default swaps .

          Expecting future generations of taxpayers to cover losses associated with them is plain wrong and would be a straight forward transfer of wealth upwards .

    • alexmews
      Posted January 27, 2012 at 9:27 am | Permalink

      exactly, stewart. while i dont think the wayne rooney comparision is that relevant as he is not being paid by my taxes – would the Hester pay package put him at the very top of the public service (incl quangos) pay scale or not? i dont think so.

      anyone have the list?

      • Mark
        Posted January 27, 2012 at 11:42 am | Permalink

        So none of the BBC licence fee goes to Manchester United for screening matches? Or you don’t have a TV?

      • lifelogic
        Posted January 27, 2012 at 12:22 pm | Permalink

        Managers unlike footballers like Wayne Rooney can be replaced by two or more people and clearly they help sell ticket to fans so the comparison is not really valid.

        This is not true for bank managers and directors. If I had to run RBS I am sure I could run it far better using 20 good people on £100K each than with Hester on £2m+ bonus and salary. You can get very good people indeed for £100K at the moment.

        Also is Wayne Rooney thick? Surely it is his brain power that controls his nerves, legs, feet, head, muscles, timing, tactics and his positioning on the pitch. He seems to do all this rather well.

        • lifelogic
          Posted January 27, 2012 at 6:08 pm | Permalink

          Come to think of it I think twenty £100,000 footballers would be rather better than one Wayne Rooney on the team, were it within the rules of football. I cannot see that the same would not apply to banking. After all I see Hester is yet another Oxford Philosophy, Politics and Economics graduate and so should clearly be regarded with some suspicion. Nor I see has government owned RBS lend as much as promised to businesses leading to the lack of growth, jobs and confidence. Indeed my experience is it is not in the lending business at all really.

          • A different Simon
            Posted January 28, 2012 at 4:10 pm | Permalink

            “Indeed my experience is it is not in the lending business at all really.”

            Not really a bank then are they . Time a bunch of them had their banking charter and taxpayer provided deposit guarantee removed .

            Now Wayne Rooney’s manager Alec Fergusson is a seriously smart cookie .

            No Govt would ever risk putting him in charge of a public enquiry or to produce a white paper for pensions or anything else they want to kick into the long grass .

    • Winston Smith
      Posted January 27, 2012 at 12:45 pm | Permalink

      Rooney is paid a lot of money because he’s the best player in the most successful football club in England and the 2nd or 3rd richest, most successful club in the World. He has a talent admired by millions around the globe. The football industry is one of England’s most successful exports and earners, with no input from the State (lesson there). Success is not always measured by intelligence. Have you met any of Cameron’s A listers?

      • Mark
        Posted January 27, 2012 at 4:59 pm | Permalink

        Rooney’s pay benefits greatly from the artificial monopoly created by broadcast rights – there’s an excellent analysis of the effects here:

        http://www.deloitte.com/view/en_GB/uk/industries/sportsbusinessgroup/sports/football/deloitte-football-money-league-2011/1cf28c129dffd210VgnVCM2000001b56f00aRCRD.htm

        Personally, I don’t consider Rooney to be a better player than some of his predecessors – e.g. George Best – yet he gets vastly greater pay in real terms than Best ever got.

        Top pay in banking is also the result of artificial monopolies, reinforced by the FSA requirements for registration, and in the case of directors they decide whether someone is deemed a fit person. I don’t think the FSA had much clue about the fitness or otherwise of Fred Goodwin or Adam Applegarth. I also think that the FSA was an inappropriate choice of arbiter, as they had no skin in the game: they would simply point to having followed their own rules, rather than making a judgement.

      • Stewart Knight
        Posted January 27, 2012 at 7:18 pm | Permalink

        The football industry makes little or nothing for the country in terms of hard cash. It is one of the few multi-billion industries that generate very little, if anything. Wages is the biggest cost and most of that sees multimillionaire accountants avoid tax for the players.

        Rooney isn’t paid for his skills, but because he is a marketable item, and also because he demanded it or he would leave. His wife (probably likes a good lifestyle-ed) like the club (is) and his skill, such as it is, has little or nothing to do with his wages. Who pays his wages? The poor suckers fleeced out of a massive ticket price. If he was a loan company, private and no tax payer subsidy, we would be screaming about how he was a profiteer.

        The analogy stands as Hesters pay and perks would be STILL an issue if RBS was a private company.

        • lifelogic
          Posted January 28, 2012 at 12:49 pm | Permalink

          The analogy does not stand as Hester could be replaced by 20 others very nearly as good for less money. You can only have 11 footballers on the team.

        • A different Simon
          Posted January 28, 2012 at 4:39 pm | Permalink

          Rooney puts his money back into the economy by spending it .

          Sadly half the UK would respect him more if he created a massive buy-to-let portfolio to profit from the housing shortage at potential first time buyers expense .

          • lifelogic
            Posted January 29, 2012 at 8:08 am | Permalink

            If he did buy a buy to let portfolio that put money into the economy too. It helps builds houses and pay builders or buys them off others who then have the money to spend.

  6. Brian Tomkinson
    Posted January 27, 2012 at 9:03 am | Permalink

    John, I think you should be appointed chairman of RBS with executive powers to sort the mess out properly.

  7. Robert K
    Posted January 27, 2012 at 9:12 am | Permalink

    Fact: the board of RBS gets paid a lot
    Fact: that grates with the public and sentiment is stirred up by the government
    Fact: the government is the main shareholder of RBS but doesn’t exercise its votes to reduce pay
    Conclusion: the Cabinet is contemptible – it wants to curry favour with voters by stirring up hatred of the banks but on the the other hand it doesn’t have the guts to put its votes where its slippery mouth is.

    • Winston Smith
      Posted January 27, 2012 at 12:46 pm | Permalink

      Spot on.

  8. A.Sedgwick
    Posted January 27, 2012 at 9:14 am | Permalink

    The RBS share price has halved in two years so the market has given its verdict on the CEO’s performance. Maybe his bonus should be linked to the share price directly as well as the bonus being paid in shares. On that basis he is due nothing.

  9. RB
    Posted January 27, 2012 at 9:14 am | Permalink

    A million poound bonus in shares when the share price is pennies is likely to be a bonus that in time will be worth many times more than the figure being discussed today.

    • Mark
      Posted January 27, 2012 at 12:17 pm | Permalink

      Most penny shares have a stronger likelihood of being worthless than being worth a multiple in a few years. That’s straightforward betting arithmetic: if they are selling today at 2op, then that would be fair value for a 20% chance of them being worth £1 or an 80% chance of them being worth nothing.

      • Jon Burgess
        Posted January 27, 2012 at 8:33 pm | Permalink

        I’d agree with you if we were talking about any normal business, but UK banks have been given unlimited access to capital in the form of taxpayers money to stave off any likelihood of bankruptcy.

        • Mark
          Posted January 30, 2012 at 1:09 pm | Permalink

          Then you are suggesting that e.g. there is an 80% chance the shares would be worth 10p, and a 20% chance of them being worth 60p, so the multiple is smaller even if the downside is reduced.

  10. Posted January 27, 2012 at 9:28 am | Permalink

    When I was working, a bonus was generally paid to those who achieved results “over and above” what was expected, not just for doing their job. So as far as I am concerned, the question is, did he achieve results at the RBS which were better than might have been expected in the circumstances?
    These days, bonuses in the banking business seem to be automatic and expected, and so are not really bonuses at all, but part of the salary. There should be no such thing as an “automatic bonus”, it should be earned. And by “being earned” I don’t just mean turning up for work, which seems to be the case of numerous workers, such as tube train drivers, who are to be paid a “bonus” for not striking during the Olympics.

    • Winston Smith
      Posted January 27, 2012 at 12:50 pm | Permalink

      Which sets a precedent for any future major event. More problems for our children to save the faces of our present cowardly political elite.

  11. NickW
    Posted January 27, 2012 at 9:29 am | Permalink

    What can people do to stop the Banks looting the economy?

    Not very much is the short answer; but what people can do is to withdraw their custom from the Banks which pay unseemly salaries.

    My family has ditched all its account with the Royal Bank of Scotland and moved everything to the Co-Op Bank, (our move was also motivated by the rhetoric from Scotland’s oleaginous First Minister).

    Perhaps Banks should be compelled to display a notice in all their Branches which summarises their remuneration policy for Executives, so that the public have the necessary information to withdraw business from the overly greedy?

    • Mark
      Posted January 27, 2012 at 5:36 pm | Permalink

      The best thing would be to break up the banks and create some proper competition. But to be able to do that successfully, the underlying problems with the existing bank balance sheets have to be tackled. Those problems in the UK are concentrated in bubble property prices with their implications for the mortgage books, and in sovereign lending, where there is a bond market bubble.

      So long as politicians (and voters) are unwilling to face up to the consequences banks will be able to carry on as before – at least unless we get another and deeper banking meltdown.

    • Stewart Knight
      Posted January 27, 2012 at 7:20 pm | Permalink

      The banks didn’t loot the economy before Brown and Blair eased regulation to such n extent that they could, especially in housing and mortgages where we saw the biggest increase in taxes.

      Blair and Brown are to blame, not the people who took advantage of their lax regulations. I wouldn’t pay more tax than I needed to, and I wouldn’t limit my profit either, neither would you or virtually anyone, and neither did the banks during the past fifteen years. Who let them?

  12. Disaffected
    Posted January 27, 2012 at 9:33 am | Permalink

    As I understand and recollect him being questioned by MPs of a select committee, Mr Hester did not apply for the job he was asked on behalf of the former government to help sort the mess out. While I do not have much sympathy for bankers generally, I think he is doing what he was asked and it will take a long time to achieve because of the vast amount of money concerned- a bit like the government debt and deficit. The biggest travesty is that the previous government (Blair and Brown) changed baking regulation to create the mess. What action is being taken against the politicians who allowed this to happen? What is happening to the ministers who wasted 12 billion on a useless redundant computer programme for the NHS? How about the minister who wasted billions on defence contracts? While bankers can command such salaries it might be best to leave Mr Hester alone to sort out the mess that Labour created. After all they knighted SIr Fred for the job he was doing!!

    Mr Browne MP last night said Mr Hester had a public duty to refuse his bonus. Is that the same public duty not to claim second homes, expenses or milk the expense system for all it is worth? Or Mr Darling and Byrne being able to collect a £20,000 tax free payment for leaving the Treasury in a mess? Or the same public duty relating to lobbying, second jobs, employing family members? Cameron and Clegg were going to clean up politics- very little action to date. MPs like Mr Browne need to think carefully and look in the mirror before making inappropriate judgements on others.

    MPs Lack credibility when it comes to standards and that is why it is so important that standards of MPs should be beyond reproach when they create laws, policy and regulation for the way we ordinary folk live our lives. Until they demonstrate the leadership skills to sort out the pervasive corruption at Westminster then they have no voice on public duty, morals, standards, honour that is worth listening to. They do not even conform to the Nolan Standards on public life that they imposed on all public sector workers.

  13. oldtimer
    Posted January 27, 2012 at 9:33 am | Permalink

    As I recall Mr Hester was not responsible for the collapse of RBS. He was persuaded to take on the uneviable job of trying to sort out the mess. Presumably he was sensible enough to negotiate a contract before doing so, including the terms of any peformance bonus. I have no idea what these are but, given he is getting one, it cannot solely depend on the RBS share price. Presumably some of it will depend on his success or otherwise in reducing the bank`s, and thus the Treasury`s, exposure to billions of liabilities.

    It would be helpful to have been advised of the reasons for the bonus. It might have spared Mr Hester and the bank`s remuneration committee some of the lynch mob comments which have assailed them. Are you able to enlighten us?

    After this assault I would not be surprised if Mr Hester started to reply to calls from the headhunters. As for Mr Cable`s remark that deciding on Mr Hester`s bonus was “above his pay grade”, if that is so how can he possibly be considered competent enough to discharge his ministerial office – or to find a successor to Mr Hester?

    • Disaffected
      Posted January 27, 2012 at 1:16 pm | Permalink

      Totally agree.

    • alan jutson
      Posted January 27, 2012 at 3:09 pm | Permalink

      oldtimer

      My thoughts exactly.

      Also Mr Hester is not a Civil Servant, he works for what should be, a commercial organisation, which needs rather different and more extensive skills than a civil servant.

      Yes I fully agree the Bank is bank rolled by the taxayer, but that is not his fault, like wise his contract (he came in after the bailout did he not).
      The government at the time had an option on who to employ, on what terms, and for how long.
      Seems to me that paying a bonus in shares is a better way to go than extra cash, particularly when there is a minimun time scale for holding such shares.

      The very last thing I want to do is defend bankers, but has he not already given up 40% of his bonus (according to reports)

      Any idea how long his contract is for John, and were set bonus terms included within it or not.

      Reply: I believe the contract said he was entitled to an annual bonus to be set by the Board.I do not know its length

    • Kevin Ronald Lohse
      Posted January 27, 2012 at 3:34 pm | Permalink

      Right on the button

    • Gary
      Posted January 27, 2012 at 5:27 pm | Permalink

      “He(Hester) was persuaded to take on the uneviable job of trying to sort out the mess.”

      Well, he is failing :

      http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=rbs&insttype=&freq=2&show=&time=12

      • Stewart Knight
        Posted January 27, 2012 at 7:22 pm | Permalink

        Which is why he can’t cash his bonus, in share options, until 2014. If he is still failing, which seems unlikely, he will lose out on his own bonus.

      • Mark
        Posted January 27, 2012 at 9:27 pm | Permalink

        The banking sector is failing.

  14. Andy
    Posted January 27, 2012 at 9:39 am | Permalink

    Bank bonus payments are a matter for the Shareholders of that bank. Unless the employees can show that they have added to the value of the business, and thus enhanced the value of the company to the shareholders, there ought to be no question of a bonus in any shape or form. This whole ‘culture’ of bonuses is nothing more than employees – and lets remember even the grandest director is an employee – looting the company and stealing from the shareholders. I believe that last year another bank paid out over £2.5 billion in bonuses and a mere £750 million in dividends. And lets also remember that many banks paid out bonuses while suspending all dividend payments. Many directors seem to have forgotten what their primary duty is. Time to remind them.

  15. lifelogic
    Posted January 27, 2012 at 9:59 am | Permalink

    Indeed bonus payments should be related to performance or for risking your own money. So far, as I see it, RBS/Natwest has just been calling back good loans thus causing a huge loss of jobs and negative growth and inconvenience in the companies affected. Meanwhile upping their fees and charges hugely as they are able to in the hugely uncompetitive current banking market. Still let us hope he does sort the bank out eventually anyone can make good money in banking at the moment if they actually have any money to lend.

    • lifelogic
      Posted January 27, 2012 at 12:39 pm | Permalink

      His approach may be turning the RBS/Natwest/Coutts bank around but it has certainly caused huge damage to many good businesses and the country. Made even more irritating with their “Helpful Banking” adverts.

      • forthurst
        Posted January 27, 2012 at 5:19 pm | Permalink

        According to Gideon Osborne, ” [Hester] was asked to shrink – by my predecessor – the size of its balance sheet and the size of its workforce. He is doing those things”.

        Has the government reviewed the objectives given to RBS by the previous administration? If the bank found itself in possession of toxic assets, were they encouraged to invite the (words left out ed) Fed to buy them back as they have done from so many institutions in order to avoid (allegations about their role in the credit crunch-ed), or have they been encouraged to hamstring and bankrupt viable businesses in order to shrink their balance sheet? Further he said it was “difficult to justify the levels of pay in financial services”…but was “an issue for the financial services industry to ask itself about”. Oh really? Why are the taxpayer owned banks not being broken up to create more competition? Is it not time to examine how banks ‘create’ money and then syphon off disproportionate amounts for their employees?

  16. Mactheknife
    Posted January 27, 2012 at 10:08 am | Permalink

    I’m tired of ‘banker bashing’ and its being used by those on the left as the cause of all our financial woes. This is untrue. What the banking collapse did was highlight the profligate spending of world governments, our own Labour government included. This is now the real problem, but as we see now Labour are twisting and turning trying to sound fiscally responsible, yet deep down wanting to continue spending. On the subject of RBS, I read that this man is actually doing a good job in reviving the fortunes of RBS, and yes there will be some tough decisions to make for him such as the recently announced redundancies, but overall he is seen to be a ‘safe pair of hands’ as the saying goes. So if he is doing a good job and RBS is turning around, which is in all our interests, then pay him his bonus – I dont see the problem.

    • Gary
      Posted January 27, 2012 at 5:40 pm | Permalink

      Who financed the sub-prime property market ? The banks.
      Who wrote over $600 Trillion worth of derivatives, mostly on the property market ? The banks.

      The govts ran into real trouble assuming a large chunk of the banks’ bad debts in the bailouts.

      You are defending the indefensible. The market would have ,and should have been allowed to kill them off.

      • Bazman
        Posted January 28, 2012 at 2:09 pm | Permalink

        It was nothing to do with banking Guv. It was all the fault of the regulatory framework of the banking sector. This allowed human nature to take over or the nature of markets or the nature of nature. This allowed the banking sector to get into this mess, but any measures taken to control banking will be like controlling the weather. What is needed is a regulator to control the regulations and leave banking alone to generate wealth. I’m sure many people could ad lib this one better than me.

  17. Electro-Kevin
    Posted January 27, 2012 at 12:39 pm | Permalink

    RBS is undermining the Conservative position on austerity and cutbacks.

    I find that I can’t win any arguments with lefties when they play this trump card.

    • Electro-Kevin
      Posted January 27, 2012 at 12:47 pm | Permalink

      “OUTRAGE OF HESTER BONUS”

      “I do wonder, who’s outrage though? What exactly is the going rate for running an organisation of over 100,000 people and being tasked with turning round a company that lost £28 billion shortly before you joined, into one that can be sold for double its current shareprice and deliver back to taxpayers £35 billion whilst also removing £250 billion of liabilities from the UK national debt.”

      From City Unslicker – Now I’m primed for those Lefties.

      • Winston Smith
        Posted January 27, 2012 at 5:03 pm | Permalink

        How does a regional high street bank grow to employ 100,000 people? Ignoring RBS for a moment, huge bonuses are paid in the City because some companies are making huge profits. How are they making such profits? Basic economics tells that large profits are short- lived, as new entrants to the market seek some of these profits and margins drop. So why is this not happening? The State’s role whould be to intervene to stop restrictive practises and open up the markets to spread the wealth. We need Thatcherism, not socialist corporatism.

        • Electro-Kevin
          Posted January 29, 2012 at 10:49 am | Permalink

          Winston – In answer to your question. I don’t know how a high street bank grew so large (well, actually it was through trading and ‘clever’ banking products.)

          We are where we are and RBS is now the taxpayer’s baby.

          We need the best man to mitigate our exposure and paying him in lots of shares seems like a darn good way to motivate him.

      • uanime5
        Posted January 27, 2012 at 7:21 pm | Permalink

        Given that under Hester the shareprice of RBS fell by £1.5 million and creating nearly £1 million worth of shares caused it to fall further I doubt it will double its shareprice any time soon.

        Reply: The share price has fallen considerably less than £1.5m per share! The market value of RBS has fallen much more than £1.5m. Do try to get your figures in the real world.

    • Winston Smith
      Posted January 27, 2012 at 12:55 pm | Permalink

      Perhaps you should remind them who bailed RBS out, who encouraged them to buy ABN Amro and who signed Hester’s contract. Yes, the lefties.

    • Mactheknife
      Posted January 27, 2012 at 2:57 pm | Permalink

      You could argue that the urgent need as we are the public owners, is to put RBS back into the black on solid ground. That way it will be floated back into the private sector at a good price and billions returned to the public coffers. If it takes good quality leadership at a couple of million a year it will be money well spent and the left can then continue to squander it on welfare benefits.

      • Electro-Kevin
        Posted January 28, 2012 at 12:54 am | Permalink

        Winston, Mac – Thank you. I think I answered my own doubts at the same time as you did.

    • lifelogic
      Posted January 27, 2012 at 4:01 pm | Permalink

      You can never win argument with lefties or (the renewable energy lot) it is a religion, a gut feeling they have or a gene they have inherited. Most grow out of it at about 25+ but some are alas beyond hope.

      They are often very pleasant and entertaining but, rational logic, rarely comes into it. Many seem to work for the BBC, the state sector, the NHS, universities, schools, the “Arts” and charities. Some have a chip on their shoulder from a poor up bringing others have rich parents and feel a bit guilty about it. They are usually very proud of their inability at maths, economics and science but still often have strong views on them. Such as being pro renewable energy, anti Murdoch, pro trains & bikes, anti car/planes (except the ones they use) and very anti Dr Beeching.

      • Electro-Kevin
        Posted January 28, 2012 at 9:26 pm | Permalink

        Lifelogic – I agree with you over entrenched ideologies. Pleasant and entertaining isn’t the preserve of the Left. In fact they can be among the most tricky of people socially.

  18. Michael Read
    Posted January 27, 2012 at 1:24 pm | Permalink

    I see, Mr Redwood, that your blog’s posters, who I’ve always thought were drier than your good self, have morphed temporarily into Maoist revolutionaries.

    Next thing, they”ll be massing in tents outside the Bank of England.

    • JimF
      Posted January 28, 2012 at 9:40 am | Permalink

      No, Maoists would pay the same rate regardless. We’re just proposing boni for success, rather than failure.

    • lifelogic
      Posted January 28, 2012 at 12:54 pm | Permalink

      I am all in favour of rewards for risk capital and good performance as an employee. Not for directors helping themselves to shareholder’s money as is so common.

  19. eddyh
    Posted January 27, 2012 at 6:23 pm | Permalink

    What is wrong with anyone being paid a salary, at whatever level, for doing a job. Get rid of bonuses completely, by legislation making them illegal if necessary. Then if the job is not done satisfactorily they can be sacked. they should not be paid extra for success.

    • lifelogic
      Posted January 27, 2012 at 8:12 pm | Permalink

      Far better if they all get just bonuses (set by performance) and no salary at all.

    • JimF
      Posted January 28, 2012 at 9:39 am | Permalink

      I disagree.
      If you own an asset like an RBS share, you want the people who work that asset to sweat to increase its value. It’s in your interests to offer a bonus to employees based on the increase in value (sharing the proceeds, I think it’s called). Equally, when the asset decreases in value, there should be a stop-loss i.e. employees get no bonus.
      If a bonus was offered to Hester, it should be paid (or not) at some mutually agreed time when the share price would be deemed to be higher than the strike price of the bonus deal.
      We just can’t have these people winning either way. When the share price drops, it’s a bonus for failure, whichever way you look at it.

  20. uanime5
    Posted January 27, 2012 at 7:26 pm | Permalink

    Hester is paid £1.2 million to be CEO of RBS. While running RBS the share price has fallen by £1.5 million. The response by RBS: give Hester a bonus of nearly £1 million in shares. I’d hate to think how much he would get if the share price actually rose.

    Also despite Cameron calling on shareholders to take more action in curbing excessive levels of remunerations and the Government owning 83% of RBS no one in Government seemed willing to reduce these bonuses to a sensible level. It seems the Government does not practice what it preaches.

  21. Jon
    Posted January 27, 2012 at 7:30 pm | Permalink

    What got me this week was the many many millions that will be spend on bonuses and spanish practices to get the rail workers to clock on for work. Its a list that I’m not going to compile as it would be a long one.

    It dwarfs what the head of RBS is getting. I’m not looking to justify his bonus here I’m just disgusted and fed up by the cost of getting rail workers to turn up for work. Tube drivers will soon be on a basic package over £75k excluding these bonuses and overtime. One of the many bonuses they get is £100 per week for 9 weeks in summer if they clock in. That excludes the Olympic lump sum bonuses.

  22. Jon
    Posted January 27, 2012 at 7:34 pm | Permalink

    ..Oh and they are all to get an all expenses paid free Olympic jaunt so they can feel more in the Olympic spirit.

  23. Alan Wheatley
    Posted January 27, 2012 at 9:48 pm | Permalink

    If a bonus is paid in shares that can not be redeemed until a future date that there is an incentive to work to achieve a rising share price.

    By the same token, if a bonus is paid as the number of shares equivalent to their current valve then there is an incentive for the current share price to be low (i.e. more shares now, higher return later).

    Perhaps it would make most sense for remuneration contracts as to a bonus paid in shares to be structured so that the bonus is paid as a number of shares irrespective of their current value.

  24. outsider
    Posted January 27, 2012 at 10:07 pm | Permalink

    Penny Hughes, chairman of the RBS Remuneration Committee really ought to be fronting up to explain and justify this, given the political embarrassment and majority ownership by the public.

  25. Caterpillar
    Posted January 27, 2012 at 10:11 pm | Permalink

    I think the act of banks worlswide moving from largely cash based to share based (with time restrictions) bonuses is a godd step, and should be considered like this. It is almost like giving cash and then forcing the employee to immediately buy options with a tow or three year time horizon. Overall I think this approach to bonuses is more sensible.

    I prefer this because there is a switch in mentality from ‘performance related pay’ to ‘pay related performance’ i.e. the employee now needs to perform to achieve the reward or it is not going to be worth much.

    The danger I see is that there will be a shift to larger bonuses in shares rather than smaller in cash, the argument being given that there is more risk attached to the bonus, rather than bonuses at current prices being smaller with the focus on upside opportunity for success.

    But again, overall I prefer the switch of bonuses out of cash.

  26. Gordon
    Posted January 28, 2012 at 12:27 am | Permalink

    Mr. Redwood,
    All well and good, but had they only listened to you in the first place , we would not be here now.
    No, the socialist psychopath from north of the border had to “save the world” and now his henchman Milliband is whingeing about the consequences.
    Ye gods!

  27. jon
    Posted January 28, 2012 at 7:58 am | Permalink

    the people to have their say on how the country is run?
    shareholders to set the pay of company bosses?
    a stop to excessive bonuses for poor performance in the city?
    how the hell are we expected to trust you David C when you have just contradicted all of your objectives of how you said you were to run the country?

    a £1,000,000 bonus for poor performance!
    lottery win figures for most.

  28. Bazman
    Posted January 28, 2012 at 2:02 pm | Permalink

    “Hmmm! I see. Of course we don’t respond to threats. …and such a decision would of course set precedents…(Fingers together and lean back)… Well that’s your decision… See you in court and the rest of your members if necessary, and if necessary we will change the law to facilitate this. Get out before I have security remove you.” Said the minister to the union boss misguidedly trying to improve the lives of his members.
    Imagine if this was a bank boss in some misguided attempt to give his himself better life and not some Arther Scargill type holding the country to ransom. Ram it.

  29. Conrad Jones (Cheam)
    Posted January 28, 2012 at 5:42 pm | Permalink

    Vince Cable ; Dec, 20 2010

    “He said: “The banks shouldn’t underestimate our determination to act. They are deluding themselves, really seriously deluding themselves, if they believe the Government is not going to take this seriously.”

    I guess Banks don’t take Politicians too seriously afterall.

    Times of austerity for Public Sector Workers?

    I suggest Dr Cable consults with Steve Baker, Douglas Carswell and Michael Meacher for a solution to this humiliation. George Osborne also needs to be informed of alternative ideas of how to restructure Banking which will bring about a sustainable future.

    Mr Redwood, please don’t turn Dr Cable into a scape goat for the lack of understanding of many MPs from all Parties on how to deal with the Banking Industry.

    I’m not a fan of Dr Cable, but he cannot reform the Financial Infrastructure of the planet all by himself. This requires an open discussion in the House of Commons on what the proposals are for fixing our insane Banking and Monetary Systems.

    The Banks are operating within the Law, so it is the Law that has to change, not the Banks. Remove the Subsidies for Banks and money creation by Banks, and the Bonus issue will disappear.

    Many knowledgeable people are saying that the only way our Banking System will be fixed is after a Total Collapse of the Financial System. Only then will alternatives be considered.

    Let’s hope we can avoid this if possible by coming up with a better solution than the Bank of England creating more digital money that it deposits in a Bank’s Reserve Account.

  30. Pericles
    Posted January 28, 2012 at 6:52 pm | Permalink

    Capitalism is a marvellous system but it works only when those taking the risks actually face them. When the profits accrue to the entrepreneurs but risks are socialized, the system fails; this is where we are to-day.

    When, in 2007/08, the politicians stole tax-payers’ money and used it to shore up the failed financial institutions that support their re-election campaigns, they ensured that, what ever eventually followed the present World slump, exactly the same disaster will recur — the financial institutions will take unconscionable risks absolutely certain of their being borne by the tax-payer.

    All this hullabaloo about Mr. Hester’s bonus is nothing but a smoke-screen for those same politicians. Along with the rest of the banking industry, the C.E.O. of the Royal Bank of Scotland is merely doing the job for which he was hired and accepting the rewards.

    He is looking after number one; if you the people be stupid enough to elect politicians that squander your money in the way I have just described, you deserve all you get.

    ΠΞ

    • Conrad Jones (Cheam)
      Posted January 30, 2012 at 1:56 pm | Permalink

      The problem was not that they bailed out the Banks – because they had to; the problem is not knowing why they had to bail them out and after doing so, doing nothing to bring back the power to create money by the Government and removing that privelege from the Banks.

      If they hadn’t had bailed out the Banks, lending would have ceased; as our money supply is made up entirely of credit (>97%) the UK economy would have been forced into a Depression.

      The System of money creation (Fractional Reserve System) needs to be abolished. Douglas Carswell MP (FELLOW CONSERVATIVE) is fighting for this in the House of Commons.

      Money should only be created through the Bank of England controlled by the MPC with Policy dictated to it by the Government (elected by us).

      Banks should then lend money that it gets from us and act as an intermediary between Saver and Borrower and not a counterfeiting syndicate.

      I only wish Mr Redwood would see the the light too. Alas, I feel he does not understand the affect of Bank created money. Of course Bank CEOs get huge bonuses – they can pull money out of thin air
      (using accountancy slight-of -hand), just like a magician can pull a Rabbit out of a Hat.

      Legally Banks own all our money. they do not need our permission to do with it as they see fit, even if that money goes into Tar Sands development or Nuclear Bomb making facilities. They only have an obligation to return our digital money if we request it. If profit can be made from investing it in an Animal Laboratory, then that’s where the money will go. But most of the lending has been directed at Housing, as Collateral is secured in the House being bought, Businesses are more risky therefore many Businesses do not get off the Ground. Only 8% of Bank Lending goes into productive activity.

      Banks operate within this framework, we need to change the framework – the Banks will follow and adapt to whatever this framework is.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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