Banks give capitalism a bad name, IoD chief complains

Simon Walker says 'rewards for failure' and £1m salaries undermine public faith

Over-paid bankers have "given capitalism a bad name", according to the director general of the Institute of Directors, Simon Walker. He said it was "unacceptable" that more than 500 employees of Barclays and the Royal Bank of Scotland had received remuneration in excess of £1m in 2012, a year in which both banks were embroiled in interest rate-rigging and product mis-selling scandals.

"Shareholder value has been destroyed, capitalism has been given a bad name, key measures of the market have been manipulated for cynical gains, taxpayers have shelled out billions to bail banks out, and yet vast reward packages are still being handed out," Mr Walker said at an event on Tuesday hosted by the Chartered Institute of Public Relations.

Mr Walker, who became head of the IoD in October 2011 after a career in public relations, said that the "rewards for failure" at large banks were undermining public faith in free markets.

"The wider population are starting to become concerned, incensed even, by the perceived failings of private business," hewarned. "Those voters are starting to question the system itself. And that is understandable."

He said that trying to put a positive gloss on banks' recent behaviour was like "polishing a turd", and added that only a substantive change in behaviour, rather than public relations spin, could restore public faith in the sector.

"People outside the communications industry sometimes think that it is possible to spin anything – that the proverbial turd can indeed be polished, if you'll pardon the metaphor," he said. "But sometimes it can't – sometimes the underlying facts are the problem. Sometimes the best communications advice has to be to change the behaviour that is inviting bad publicity."

Rejecting the idea that it was his job to defend all businesses, he said: "The IoD's role is to promote good business. To defend the reputations of the millions of businesses who do the right thing, we must call out those who do wrong."

Mr Walker, who headed the BVCA, which represents British private equity and venture capital, before joining the IoD, described the forthcoming European cap on bankers' bonuses as "wrong-headed and counter-productive", but he added that the failure of banks to restore sanity to their remuneration practices made it impossible for others to make a credible case against it.

Under the agreement, bonuses in banks across the EU will be capped at a year's salary, but it can be a bonus worth 200 per cent of their pay if explicit approval from shareholders is secured.

Andrew Bailey, head of the new Prudential Regulation Authority, has predicted that UK banks would respond to the bonus cap by raising fixed salaries by around £500m.

"It's being driven by popular anti-bank sentiment," Mr Bailey told his confirmation hearing at the Treasury Select Committee yesterday. "It won't have the effect of reducing overall remuneration."

Mr Bailey also said that although Royal Bank of Scotland and Lloyds would be named by the regulator next week as needing to raise more capital to bolster their positions, he had not been pushing for the Government to inject more capital into the two institutions, which had to be rescued by taxpayers in 2008.

Last week Sir Mervyn King, Governor of the Bank of England, argued that RBS should be split into a good bank and a bad bank, with the latter speedily sold back to the private sector.

Start your day with The Independent, sign up for daily news emails
News
Keith Fraser says we should give Isis sympathises free flights to join Isis (AFP)
news
Life and Style
Google celebrates the 126th anniversary of the Eiffel Tower opening its doors to the public for the first time
techGoogle celebrates Paris's iconic landmark, which opened to the public 126 years ago today
News
Cleopatra the tortoise suffers from a painful disease that causes her shell to disintegrate; her new prosthetic one has been custom-made for her using 3D printing technology
newsCleopatra had been suffering from 'pyramiding'
News
people
Arts and Entertainment
Coachella and Lollapalooza festivals have both listed the selfie stick devices as “prohibited items”
music
Sport
Nigel Owens was targeted on Twitter because of his sexuality during the Six Nations finale between England and France earlier this month
rugbyReferee Nigel Owens on coming out, and homophobic Twitter abuse
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Client Services Assistant

£18000 - £20000 per annum: Recruitment Genius: A Client Services Assistant is ...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor