Some of the on-goings in the business world of the past few days, seems to now be getting a reaction from the business community. But, much as the leadership of the politicians has been dragged nose-first by the media into the leader less quagmire, the business leaders seem to have been suffering from the same lack of vision affliction, calling the stripping of Goodwin’s knighthood “hysterical”. As a result, are we in danger of demonising business?

Firstly Stephen Hester, CEO of RBoS and his proposed £970,000 bonus on top of his £1,200,000 salary. I argued last week and still feel that Hester should have taken his bonus, but recognised the rightful man on the street problem, and hence given it to create a new bankers charity to create jobs. However, the whole issue snowballed in a political football, and by Sunday after his own chairman had given up his bonus, did Hester have an option to not also follow suit? The fact that the leaderless Labour party (what was that Lasagne party about, anyway?) had decided to devote a whole Parliamentary debate to the subject, was but the belt and braces moment after the (fox hunting) horse had bolted. Labour have now decided to devout the debate to the same issue, but also widen it to “board level salaries” – it just about sums up the whole lack of political leadership from all sides at present.

Secondly, the former Sir Fred Goodwin, who has been (rightly) stripped of his knighthood. I think its daft neigh blind and stupid, but incredibly loyal, for his friend Sir Jackie Stewart to come out and say that it’s the wrong and a politicised decision. Excuse me, but when did the honours system, which after 100 years of politicisation in the Blair regime under Lord Levy got down to a £100,000 cheque for a coat of ermine, not become politicised?

But its damned suicidal I believe for the head of the Institute of Directors – of which I am a member – to come out in a media interview and say the same thing on behalf of British business. If he had bothered to read the brief of the Honours Forfeiture Committee, then he would have read not only: the first issue of consideration (a conviction resulting in a period of jail over three months); but also the second (has been censured, struck off etc by the relevant professional or other regulatory authority for action or inaction which was directly relevant to the granting of the honours); and clearly not the third (If there is other compelling evidence that an individual has brought the honours system into disrepute, then it is open to the committee to consider such cases as well).

True, the FSA didn’t find Goodwin guilty of a criminal offence, but it did come to an agreement with him that he wouldn’t be a director of a bank for “some considerable time”. Secondly his knighthood was for “services to banking” and yet the same FSA report concludes that not only was RBoS at the centre of the UK banking crisis, but that decision-making at RBoS centred around and was within the whim of Goodwin. I hence can’t see how a decision to remove his knighthood can be concluded as politicised, when he seems to have both been censured by the relevant professional body, and brought the whole honours system into disrepute.

But, as other business leaders suggested who commented around these two incidents, is business being demonised as a result?

I personally conclude that it is not, but that’s only because the man on the street seems to have fewer political ambitions than the headline writers of the British press, and yet also more vision and far more common sense than the leaders of any of the main political parties.

Other wise, how could we continue to explain the popularity of maverick business heroes like Sir Richard Branson, Stelios Haji-Ioannou or Sir James Dyson? I’ll leave Lord Sugar out of this argument, as he politicised himself at the end of the short-lived Gordon Brown administration.

All of these knights are billionaires, incredibly well paid – but also self-made. Clearly if business was being demonised, the these people should be tarred with the same brush. OK, so the media in its faux-opposition role (in light of the lack of a Milliband lead one) keeps trying to viral-market the story about Branson and free holidays for the Met Police. But the fact that they are not tarred says that the man on the street knows the difference between your own sweat, blood, tears and money being risked; and theirs, in the form of a taxation-led bailout or a retirement fund that is now a lot smaller.

In fact, I wholly believe that Sir Stelios has shown the politicians the way forward. In his latest attack on the current board of EasyJet, he proposes to block an AGM proposal for 10 directors to receive £8M in share options as follows to other shareholders:

These guys are welcome to resign anytime. I know as shareholders we could easily replace them with talented executives and experienced non-executive directors who will cost half as much in bonuses. We must take a stand against directors who seem to regard our company as their personal piggy bank to be dipped into at will.

The issue of fairness – between the man on the street and the executive – is nicely summarised by this statement. Did you earn your pay, let alone your bonus; or are you dipping into a piggy bank just because you can?

On that count, much as though approval of his bonus followed all due process right up to the Chancellor and Prime Minister – however informally involved – until RBoS shows a profit and some of the people taxation-led bailout gets paid back, it must be concluded that Stephen Hester probably won’t get a bonus. That means he could leave, and I don’t see a better, cleaner or cheaper man – yes, whisper it quietly, a banker – for the job. Something which politicians of all sides would do well to recognise, and hence by other means agree a basis on which he is retained.

Secondly on that count of fairness, the fact that Fred Goodwin took a knighthood for services to banking, which in a later report he was concluded at the centre of crashing the industry according to the relevant professional body. Goodwin was treating the whole system – and apparently even his wife and family – as his personal piggy bank. Hence, why should he retain his knighthood? It’s not politicisation, it’s just not right or fair that he keeps it.

I can accept that Goodwin’s friends won’t be able to see this; and I can see that while Hester is contractually due a bonus, poor politics and media frenzy lead to a rightful personal conclusion – it’s probably too soon. But if the man on the street can see that business is not being demonised, why can’t the business leaders?

Good Luck!

photo credit: Darwin Bell via photopin cc

Ian R McAllister is the founder of a UK group focused on recruitment and employment in skills-short professional employment sectors, presently covering IT, telecoms and project management. The group also provides professional candidate information and services via a series of online resources, including the Professional CV and Executive CV services

So, the great “get the bankers” debate has roared its head again, with the media-hyped uproar around the 2011 bonus of Royal Bank of Scotland Chief Executive, Stephen Hester.

Hester, on top of his apparent £1.2M salary – leaked by the Labour government who approved his salary and bonus package at the time of his appointment – has this year been awarded a £963,000 bonus.

Now, if you read the newspapers and media, you’d think that this had been delivered to him in cash or gold, via a courier driving a Rolls Royce he just bought with it. Ah, no. It’s in shares that he can’t get his hands on the first tranch until three years time, and the last tranch in five years time. In the mean time, because its in share options and not cash, he doesn’t pay tax on them either: bet your newspaper or website article didn’t tell you that either! Once he does divest them, then both income tax and capital gains tax at the appropriate rates will be due.

But here’s the problem on all this focus on one man’s bonus. He’s one man who was appointed after the banking crash of 2008 to both save Royal Bank of Scotland and not only get the tax payer their £45Bn back, but make a profit on it. In fact, if you had to pick a banker who was both “clean” and right to do the dirty job at RBoS in 2008, then you, I or then Prime Minister Gordon Brown, couldn’t have picked a better one.

At the time of the global credit crunch in 2008, Hester had been out of banking for 18months, appointed CEO of British Land. Having been appointed Finance Director of Abbey National in 2002, he had taken the CEO’s position in 2004 in an effort to save the former building society which had expanded into financial services far too quickly. After dividing it into a “good” and “bad” bank, he sold off the bad assets for what were later seen as above book prices, and sold the residual good bank to form the core of Santander UK. He then moved to British Land, where he led its conversion to become the first Real Estate Investment Trust in the UK. After the banking crisis, chancellor Alistair Darling appointed him to the supervisory board of failed Northern Rock, to effectively over see there what he had done at Abbey National. Then came the need to bailout RBoS to the tune of £45Bn. Sir Fred was gone, who was to replace him?

Gordon Brown then made his second great decision of the financial crisis: he appointed Hester CEO of RBoS. With a background like Hester’s, he was both one of the few bankers with a presently “clean” record in 2008, and from his Abbey National experience one of the few with the capability to do the same scale of job at RBoS.

So appointed by Gordon Brown on a Gordon Brown approved contract, Hester took a job which would pay him 50% less than he was taking at British Land, and one which was very high profile in both public and media minds. We could almost have predicted this present outcome.

In 2010, Hester took a bonus of nearly £2M in shares: not much of a murmur from the media, plus the board of RBoS proposed to resign should their proposed £1.5Bn staff bonus scheme not be approved by their major shareholder, the new Coalition Government.

2011, and we suddenly have all this hype over one man’s bonus which is half of what it was last year: why? Personally I conclude its a reflection on the banking industry post-2008 and the lack of leverage that the coalition government are making of their large share holdings in the two major banks, and not Hester. Although to read the media now you’d presently think that Hester is Sir Fred Mk2.

Lets get to some facts here, which affect us all. Your contract of employment is your contract of employment. Its private, and between you and your employer. So if the Gordon Brown approved contract for Stephen Hester says he’s due a bonus, then he’s due a bonus: sorry, we might not like it, but facts and contracts are there in black and white. Secondly, his
bonus has:

1. Been calculated and approved by the remuneration committee
2. Approved by the rest of the RBoS board
3. Approved by UK Financial Invest, the quango set-up to over see government bailout investments in RBoS/Lloyds TSB
4. Approved by PM Cameron and Chancellor Osborne: better to pay him than see him walk away

Then how can we now say “sorry mate, but the DMail and Guardian say no!”

Yes, there is something wrong when people starve, others need food parcels and civil servants are expected to take pay cuts, in a country where someone from such a tarred industry gets such a huge bonus. But he is there to do a job for us the tax payer, and he’s doing it, under the contract which he/we (via the PM) signed and approved.

So take your bonus Stephen Hester, you are contractually entitled to it. But here’s the twist I would do, if I was in his position.

I think he should take the bonus on principle BUT donate an amount – between 20% and 50% – to a national level society banking initiative. Hester’s thing is gardening – he’s on the board of the Royal Botanical Society – so it could be an initiative to get young unemployed people into work through gardening. I can’t see that he can do this without Westminster push – it is banking bonus season – but we really do have this whole thing out of balance at present on the one guy who, if there is such a thing, is a pretty clean banker.

One guys bonus, however huge, won’t solve the problems of excess in the banking industry. Stopping him doing his job now will cost us the tax payer, in both a release package and the £30Bn loss we would currently make.

Plus, if Hester were to make one personal sacrifice and futile gesture to give up his bonus, what does that do except give RBoS £1M?

If there is to be a level of change in the banking industry that we the public demand, then £1M is but in reality a small singular gesture on one day. In banking terms, a proverbial damp squib. To ensure that it is not, to match the public outrage and demands it needs political support, and that’s the problem that at the core goes hand in hand with the failure of the bankers, and which so far since 2008 has also not delivered.

Good Luck!

photo credit: Mukumbura via photopin cc

Ian R McAllister is the founder of a UK group focused on recruitment and employment in skills-short professional employment sectors, presently covering IT, telecoms and project management. The group also provides professional candidate information and services via a series of online resources, including the Professional CV and Executive CV services