Stephen Hester’s ‘Bonus’

It seems today that the Chief Executive of RBS has chosen to waive his bonus this year.  This has been greeted with general good cheer by our politicians and most people that I have spoken to.  I find it quite wrong that he should have to give up his bonus.  This may shock many – as I’m generally of a gruniad persuasion.  My main problem is that this is essentially populism riding roughshod over contractual obligations.

Populism – “a form of mobilization that is essentially devoid of theory”[1]

David Cameron loves populism, it allows him to mask some deeply unpleasant, and frankly idiotic ideas.  He generally likens things to ‘things everybody knows about’, eg likening the deficit to ‘the nations credit card’, and ‘everybody knows that you don’t pay off your credit card by spending more’!  A massive simplification.  There are many ways to pay off a deficit (read The General Theory of Employment, Interest and Money if stuck Dave), such as investment in jobs, growth & capital projects to boost revenues & reduce the unemployment bill. I’m not saying this is necessarily better, but populism stifles the debate.

I digress.  Let’s go back to Mr Hester’s bonus.  A potted history.  RBS went very wrong, we got rid of Fred Goodwin (as he will be when he is shortly de-knighted – Yes apparently that can happen!), following the need to give RBS lots of money.  Having given RBS lots of money, we pretty much owned the bank, but unfortunately we didn’t really have any money left.  So that we would get our money back, as we are a tad short of spondulicks, we decided to make sure the bank made lots of money, made itself less risky, and got the share price up.  Since this was such an important job, we decided to spend a large amount paying for somebody who knew what they were doing to be in charge.  Enter Stephen Hester.  The contract agreed gave him a very large salary (just over £1,000,000), and some potentially huge payments on success indicators (not just share price).  It could be argued, having read the shareholders annual report regarding his remittance package (thanks Ross), that perhaps more of the indicators should relate directly to share price, but the contract was agreed.  We basically said, ‘do these things and we’ll pay you loads of money, if you don’t we won’t’.  These things were specific and measurable, and contractually laid down.  Indeed the more he gets, the more we get back!

Whether this was a good deal or not is up for debate, indeed it probably wasn’t the best that we could have got.  What we can’t escape is that Mr Hester has done the things that we said he should do in order to earn a bonus equivalent to just under a million pounds.  He has met his side of the contract, but then why should we?

Enter ‘call me dave’ with a bit of populism saying, I paraphrase – ‘These bankers have caused these problems, this is obscene, he should think about waiving his bonus’.  The need for this forming of public opinion is clear, as he couldn’t break the contract without causing havoc.  No bother, bit of populism will sort it out – makes me look good, sorts out the bonus, done.

On a lighter note – how does the approximately £2,000,000 package compare with others?  £2,000,000 is about £40,000 a week.  Who else gets that?

Tom Cleverley

Darron Gibson

Junior Hoilett

Not even very good footballers!

But then they aren’t employed by a publicly funded body! Who could be paid that in a publicly funded body?? Hmmmm?

Alan Hansen - £40,000 per episode of Match of the Day!!  For telling us that some footballers are quite good, and others are a bit rubbish.

This is obviously a better use of our money than meeting our contractual obligations for sorting out a failing bank, and helping repay the massive amount that we paid into RBS.

---

[1] Populist Mobilization: A New Theoretical Approach to Populism, Robert S. Jansen, Sociological Theory, Volume 29, Issue 2, pages 75–96, June 2011