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.
International Women's Day 2014: The shocking statistics that show why it is still so important
Feminist quotes to inspire you on the International Women's Day
Oscar Pistorius trial: Reeva Steenkamp murder case turns into a bizarre safari following the tracks of a wounded lion
Belle Knox: How the porn star student from Duke University became bigger than Justin Bieber
International Women's Day 2014: Mothers and daughters describe their hopes and dreams in touching photographs
Apple's Tim Cook: Business isn’t just about making profit
Thousands of young people forced to go without food after benefits wrongly stopped under 'draconian' new sanctions regime
Ukraine crisis: New navy chief 'defects' and surrenders Crimean HQ as Putin claims ultranationalists forced intervention
Britain's top vet sparks controversy with call for ban on slashing animals' throats in 'ritual' slaughters for halal and kosher meat products
Ukraine crisis: Russia dismisses '3am ultimatum' as 'total nonsense'
If you're horrified by a flame-roasted dog, you should be shocked at a hog roast
- 1 International Women's Day 2014: The shocking statistics that show why it is still so important
- 2 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 3 Orgasm machine to deliver climax at the push of a button
- 4 Too upsetting? Academy members voted for Oscar-winning 12 Years A Slave 'without watching it'
- 5 Liam Neeson turned down James Bond role because Natasha Richardson said she wouldn't marry him if he took it
iJobs Money & Business
£12000 per annum: Inspiring Interns: The company works with Tier 1 FTSE 100 Ba...
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£37000 - £40000 per annum + £20000 benefits package: Pro-Recruitment Group: **...
£30000 - £35000 per annum + generous benefits: Pro-Recruitment Group: Mixed Ta...