Leading article: Crony capitalism and craven folly

 

Share
Related Topics

What is it about bankers' pay that makes the hard-pressed majority feel that finance capitalism is a conspiracy against them? Could it be that, more than three years after the credit crunch of 2008, we feel that the unfair rewards in the sector that caused the crisis continue unabated? Could it be that the rewards now seem even more unfair because we, the taxpayers, put up the security to bail out the banks? Could it be that we feel that politicians, who mouthed slogans about fairness and how they would put an end to excessive pay, have played a cynical game? Could it be that the way banks pay their top people seems designed to confuse us, even when we, the taxpayers, are their shareholders.

All of those. The fuss over the bonus awarded to Stephen Hester, boss of RBS, a nationalised bank, has been running all week on the basis that it was conveniently just under a round £1m. David Cameron, one moment has been saying it was nothing to do with him, the next moment claiming credit for having cut it to 60 per cent of what it could have been. As we report today, Mr Hester's bonus turns out to have been a highly coloured decoy designed to draw outrage away from the main story, which is that the total sum he can hope to collect from his three years in charge of the bank, already heading towards £39m, could reach £50m in a couple of years more if the share price performs well.

That we have been distracted by a tiny detail in a show of monstrous greed is bound to leave us feeling once again bamboozled.

As Paul Vallely argues on the previous page, something has changed in people's perception of fairness, and it is simply impossible for Mr Cameron and Nick Clegg, his accessory in inequity, to maintain that we are "all in this together" when such vast riches are lavished on a public employee at the same time as capping the benefits of the poorest.

Now, The Independent on Sunday is not anti-capitalist. In many ways, we see the distorted pay of bankers as the product of market failure. It is set by a small group engaged in anti-competitive behaviour who manage to persuade weak politicians that their knowledge is so specialist that its price must be high. We realise that turning a leading international bank round is a hard and complex task and that there are few people who have the skills needed to do it well. We accept the argument that the taxpayer should be prepared to pay talented executives well for restoring the bank's value so that we may secure a return on our investment when it comes to be sold back to the private sector. We further accept that their pay should have a performance-related element tied to the share price, which is the main objective measure of their success.

But we simply do not accept that Mr Hester is the only person who could secure the taxpayers' interest, or that anyone needs to be paid so much to give them sufficient incentive to do the job well. For the market to allocate wages like this in the private sector is evidence of restrictive practice and what even Mr Cameron calls "crony capitalism". For the Government to agree to wages on this scale in a publicly owned company is craven folly.

The Prime Minister's only defence is that Mr Hester was hired and his terms agreed, under some cultural voodoo known as "arm's-length" arrangements, by the Labour government. Ed Miliband was then a member of the cabinet that approved the deal, too cowed by the mystique of the City of London to ask simple questions, such as: "Do you know whose money this is?"

But Mr Cameron is the one who now has the questions to answer. He has sought in recent weeks to anticipate the banks' bonus season by drivelling on about responsible capitalism and how the Government is going to take tough action on unfair rewards at the top by giving shareholders more power and insisting on transparency. How hollow those words sound today. At RBS, he is the shareholders' representative, and far from asserting his power he has gone along with everything to which the banks' executives have helped themselves. As for transparency, it has taken several days for the full obscene scale of Mr Hester's pay to be brought into the light of day.

As a nation, we are tired of being taken for fools, and Mr Cameron will have to pay a terrible price if he does not ensure that we get better value for the money we sank into our nationalised banks.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Data Insight Manager - Marketing

£32000 - £35000 Per Annum: Clearwater People Solutions Ltd: Our client based o...

Data Centre Engineer - Linux, Redhat, Solaris, SAN, Puppet

£55000 per annum: Harrington Starr: A financial software vendor at the forefro...

.NET Developer

£600 per day: Harrington Starr: .NET Developer C#, WPF,BLL, MSMQ, SQL, GIT, SQ...

Data Centre Engineer - Linux / Redhat / Solaris / Puppet / SAN

£65000 per annum: Harrington Starr: A financial software vendor at the forefro...

Day In a Page

Read Next
A doctor injects a patient with Botox at a cosmetic treatment center  

Why do women opt for cosmetic surgery when there is such beauty in age?

Howard Jacobson
James Foley was captured in November 2012 by Isis militants  

Voices in Danger: Syria is the most dangerous country in the world for journalists

Anne Mortensen
Air strikes? Talk of God? Obama is following the jihadists’ script

Air strikes? Talk of God? Obama is following the jihadists’ script

The President came the nearest he has come yet to rivalling George W Bush’s gormless reaction to 9/11 , says Robert Fisk
Ebola outbreak: Billy Graham’s son declares righteous war on the virus

Billy Graham’s son declares righteous war on Ebola

A Christian charity’s efforts to save missionaries trapped in Africa by the crisis have been justifiably praised. But doubts remain about its evangelical motives
Jeremy Clarkson 'does not see a problem' with his racist language on Top Gear, says BBC

Not even Jeremy Clarkson is bigger than the BBC, says TV boss

Corporation’s head of television confirms ‘Top Gear’ host was warned about racist language
Nick Clegg the movie: Channel 4 to air Coalition drama showing Lib Dem leader's rise

Nick Clegg the movie

Channel 4 to air Coalition drama showing Lib Dem leader's rise
Philip Larkin: Misogynist, racist, miserable? Or caring, playful man who lived for others?

Philip Larkin: What will survive of him?

Larkin's reputation has taken a knocking. But a new book by James Booth argues that the poet was affectionate, witty, entertaining and kind, as hitherto unseen letters, sketches and 'selfies' reveal
Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?

Waxing lyrical

Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?
Texas forensic astronomer finally pinpoints the exact birth of impressionism

Revealed (to the minute)

The precise time when impressionism was born
From slow-roasted to sugar-cured: how to make the most of the British tomato season

Make the most of British tomatoes

The British crop is at its tastiest and most abundant. Sudi Pigott shares her favourite recipes
10 best men's skincare products

Face it: 10 best men's skincare products

Oscar Quine cleanses, tones and moisturises to find skin-savers blokes will be proud to display on the bathroom shelf
Malky Mackay allegations: Malky Mackay, Iain Moody and another grim day for English football

Mackay, Moody and another grim day for English football

The latest shocking claims do nothing to dispel the image that some in the game on these shores exist in a time warp, laments Sam Wallace
La Liga analysis: Will Barcelona's hopes go out of the window?

Will Barcelona's hopes go out of the window?

Pete Jenson starts his preview of the Spanish season, which begins on Saturday, by explaining how Fifa’s transfer ban will affect the Catalans
Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape