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
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

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own
Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

The secret CIA Starbucks

The coffee shop is deep inside the agency's forested Virginia compound
Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

How the Establishment closed ranks over fallout from Nessie 'sighting'

The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
One million Britons using food banks, according to Trussell Trust

One million Britons using food banks

Huge surge in number of families dependent on emergency food aid
Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

2,500 years of history in 3,000 amazing objects

Excavation at Italian cafe to fix rising damp unearths trove
The Hubble Space Telescope's amazing journey, 25 years on

The Hubble Space Telescope's amazing journey 25 years on

The space telescope was seen as a costly flop on its first release
Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

Did Lord Ashcroft quit the House of Lords to become a non-dom?

A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
Apple's ethnic emojis are being used to make racist comments on social media

Ethnic emojis used in racist comments

They were intended to promote harmony, but have achieved the opposite
Sir Kenneth Branagh interview: 'My bones are in the theatre'

Sir Kenneth Branagh: 'My bones are in the theatre'

The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
The sloth is now the face (and furry body) of three big advertising campaigns

The sloth is the face of three ad campaigns

Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
How to run a restaurant: As two newbies discovered, there's more to it than good food

How to run a restaurant

As two newbies discovered, there's more to it than good food
Record Store Day: Remembering an era when buying and selling discs were labours of love

Record Store Day: The vinyl countdown

For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
Usher, Mary J Blige and Will.i.am to give free concert as part of the Global Poverty Project

Mary J Blige and Will.i.am to give free concert

The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
10 best tote bags

Accessorise with a stylish shopper this spring: 10 best tote bags

We find carriers with room for all your essentials (and a bit more)
Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

Paul Scholes column

I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England