James Moore: Big business just doesn't understand it has a problem over bosses' pay

Outlook: Stephen Hester should get a bonus when the taxpayer gets a return on its investment
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The Independent Online

Is Britain anti-business? That is a view that is being loudly expressed in corporate circles as the debate over executive pay rages. The City and the wider business community feels unloved and this was apparently expressed to David Cameron at a meeting of his business advisory group yesterday.

Have the chief executives got a case, though? What has made business leaders particularly unhappy is the debate over pay, and the political response to it which came to a head over Royal Bank of Scotland's (RBS) proposed bonus for Stephen Hester, pictured. The feeling is that having agreed to a deal he was "bullied" out of taking a bonus that was rightfully his.

Then there is the view that Mr Hester's predecessor, Fred Goodwin, lost his knighthood thanks to an attack by the mob, and he was somehow denied due process.

These are the issues around which anger has coalesced together with a general unhappiness at the tone of recent rhetoric, particularly that applying to executive pay.

The trouble is, once again, this all opens business leaders up to the charge of moaning and acting out of self interest.

Sir Richard Lambert, in one of his last speeches as director-general of the CBI, argued that business leaders risked being seen as "aliens" who were "living in a different galaxy" to the rest of the public given the increasing gap between executive pay and everybody else's.

That risk is becoming reality. The current debate is not really being driven by Westminster or even the dreaded "meeja". It is coming from the grassroots up. If some of those from the business advisory group cared to spend a few hours in an ordinary pub as opposed to the more rarefied surroundings they are used to, they might well hear it.

And it is not as if business has done badly out of the Coalition. Yes the top rate of tax remains high, but corporation tax is coming down to a level that is significantly lower than in the European Union's other "big" economies (and the US). Other business-friendly measures have also been enacted.

It is true that the debate is getting to a stage where it is becoming toxic. But this isn't being helped by the lack of any acknowledgement from the business community that, on the issue of executive remuneration, it has a problem.

It is also not as if there weren't other, quite justified criticisms business could make. This country's distressingly poor skills base, for example. The crass decision to downgrade various vocational qualifications at the stroke of a pen despite the fact that some of them had been carefully worked out with industry. Then there are the immigration policies that businesses feel will deny them employees with the skills they need.

In some respects, people need to face an uncomfortable fact. There is no vast corps of manufacturing Mittelstand in Britain to fuel an economic revival as there is in Germany and the public sector workforce is coming down sharply. This country cannot escape the fact that it needs big businesses to create jobs and spearhead our recovery.

The leaders of those businesses appear, however, not to see that in the stance they are taking they are making it harder for the Government to make life easier for them.

Changing the rules for Hester might pay off

That issue about Stephen Hester has not gone away.

There are a good number of people in the City who feel he will be gone from Royal Bank of Scotland before the year is out; that he will stick around for the next few months so it doesn't look like he is storming out in a fit of pique, before delivering a two-fingered salute to a Government he feels has wronged him later in the year.

The gossips may actually be unfair to Mr Hester, who, while he is hardly delighted at the course of events, has so far put out the word that he intends to stay the course. Perhaps he realises that the best way to answer is critics is to return a revived RBS back to the private sector.

Mr Hester, for all his faults, has done a creditable job with RBS. And it would be better were he to see the job through.

That said, the issue of his bonus is not going to disappear. We will very probably go through the same debate about next year's bonus as we did over this year's.

Before that happen, efforts should be made to try to fix the problem.

So how about this: change the rules of the game. Renegotiate Mr Hester's contract so that he only receives a bonus at such time as the taxpayer gets a return on its investment in RBS.

Publish the details of how this might work in a contract up front so we all know where we are. There are already provisions in his contract to incentivise him (why do so many executives need incentivising to just to do their jobs) to do just that. Maybe the contract needs tweaking just a little to ensure that all the bonuses are paid only when the taxpayer starts to see a return on the billions pumped into RBS that should be paying for schools, hospitals and paying off the national debt.

Even under this arrangement, Mr Hester will still likely demand millions. It won't be easy for a suffering public to accept that.

And the debate over the pay and bonuses awarded to bankers, and senior executives in general, will doubtless continue. As it should.

However, the particular debate pertaining to Mr Hester really ought to end in the interests of all concerned. This might be a way of achieving that.

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