It’s often said that in Britain we live in a compensation culture, sadly it seems we like the idea of money for nothing, but not for actually doing something. Why is it that we can’t cope with high levels of pay?
The furore of the last few days over Andrew Hester’s bonus is what is taking the Great out of Britain. And what are we left with?
- A chief executive who is now lambasted as being a greedy banker, without the actual bonus that supposedly made him greedy.
- A PM who seems to have just carried out a very non-Thatcherite u-turn.
- And an ever more farcical Labour party who don’t seem to see the irony in their hypocrisy – they were the ones after all who offered Andrew Hester his contract and the attendant bonus plan in the first place.
My point is quite simple Andrew Hester deserves his bonus. He’s doing a pretty decent job. According to industry experts, pre-tax losses of 2010 should be turned into profits of £274m in 2011, on Credit Suisse forecasts, and other analysts are expecting better figures still. Part of Hester’s bonus is linked to shrinking the balance sheet. He’s doing that, most recently selling the aviation leasing wing for £4.7bn.
What seems to be ignored is that this isn’t actually a bonus but a deferred stock option plan, that is based on performance and requires him to still be in the job in 3 years time.
I listened to a radio phone-in this morning where he was being compared with teachers and nurses. This was a truly inept argument that didn’t hold water. Good talent rises to the top in any industry, so if you are a great teacher it doesn’t take long to move up the scale, and who knows you could be the one that becomes a headteacher with it’s 6 figure salary. Or maybe you rise from nurse to hospital management? My point is that you can’t compare a job that involves managing £42 billion worth of assets and 10’s of thousands of employees with a straight out of college Key Stage 1 teacher.
A lot has been written about RBS being 80% owned by the taxpayer and thus Andrew Hester is just a civil servant. As if this is justification for throwing his contract out of the window.
As a taxpayer I want our government to extract full value. So we should be paying Hester the going rate, if he can continue to turn the business around, then as taxpayers we will benefit in the medium term as RBS returns to profit and then eventually a commercial buyer can be found. And for doing that, a few million in stock options is a very fair price.
This is not about greedy bankers but about the apparent inability of the press and the public to see beyond the headlines.