January 30th, 2012
06:17 PM GMT
London (CNN) – After days of public outrage, Royal Bank of Scotland CEO Stephen Hester has agreed to waive his near £1 million ($1.5 million) bonus.
Fellow bankers say we should applaud his magnanimity. They point out that Hester isn’t the villain who drove the company to the brink; on the contrary he’s the hero, who took on the challenge of trying to save it. Besides, they say, he is paid far less than his peers.
Meanwhile, the average earner is incensed that a largely taxpayer-owned entity could even contemplate such a generous sum - one which comes on top of Hester’s already £1.2 million salary.
I am no apologist for bankers. However, I do believe that the storm surrounding RBS has less to do with bankers’ bumper pay and more to do with political point scoring.
In any case, the furore surrounding Hester’s remuneration is heartfelt. This is because it affords the public a chance to re-evaluate their views of both the financial services industry as well as the people who work within it.
Words like "bankers" and "bonuses" are difficult territory for even the smoothest-talking UK lawmaker these days. Their utterance is carefully limited to only a few well-briefed members of government who are up for the fight.
Across the rest of London, finance is starting to lose its image as the fashionable career choice for most young graduates. Why? Because they feel like the big pay packets of the past are… well… consigned to the past.
On the other side of the equation, those applying for a home loan find themselves frozen out by banks too nervous to lend. Interest on savings is paltry thanks to a base rate stuck at historical lows.
So, why is Hester’s pay grade so contentious and how does it stack up against his peers?
It’s certainly less than the multimillion dollar packages granted to Wall Street’s biggest bankers and sure to be smaller than Barclays’ resident big earner Bob Diamond.
However those institutions have not been financially saved by the man-on-the-street. A fairer comparison could probably be made with Antonio Horta-Osorio, CEO of Lloyds Banking Group, who earlier this month said he wouldn’t take his bonus, one which could have been as high as £2.39 million.
But haven’t we lost sight of what a "bonus" is actually for?
The hint is in the name: The word derives from the Latin for "good." As such, it’s an extra payment for a job well done.
Such amounts - though routinely expected in high-flying finance - are discretionary. And let’s not forget: In many jobs, out there in the "real economy" the awarding of bonuses (and big ones at that) is not standard practice.
Here’s another catch: A bonus should be paid if a company has surplus cash to do so. Yet stories abound about banks dishing out performance payments to staff even if they are in the red.
In fairness, Hester has returned RBS to profit, shrunk its balance sheet and met a number of his targets. On the other hand, his actions will result in thousands of redundancies. Those who survive the cull will share a pool of some £500 million.
But couldn’t the capital be better deployed?
What’s more, at a time of rising income inequality and promises of responsible capitalism, would pocketing £1 million not seem a little insensitive?
The uproar surrounding the RBS chief’s bonus highlights how, four years after coming to its rescue, the British public remains raw about having to bail out RBS.
They have a stake, so they want a say in how it’s run.
Unfortunately for Hester and Britain’s other bankers, the astonishing failures of their predecessors dispelled the golden-child banker myth back in 2007-2008. Bankers are no the longer the untouchable figures they once were.
It is somewhat ironic that before rocking up at RBS Hester wasn’t working as a banker. He was running the real estate company British Land.
So, I ask you, is it the size of Hester’s total compensation that irks? Or the fact that it was earmarked for a banker?
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