Been living in a banker's paradise?
So long as the good times rolled, argues Michael Prest in an essay for our latest edition, most people didn’t complain that a banker got paid 100 times more than a nurse. At least, there was a grudging consensus that this set-up “worked,” in that bankers were out there creating credit and driving the economy onwards and upwards—and were paying a hefty amount of tax into the national purse in the process. Hindsight now suggests something rather different: that that which seemed ridiculous, was ridiculous. The system didn’t work. The bankers didn’t work. So, what should we do now—and what should, or shouldn’t, people within the banking industry actually be able or allowed to earn in the first place?
Part of the problem, Prest argues, is the incentive-distorting phenomenon of banker bonuses, which are addressed in a separate short essay by a former head of strategy at an investment bank. But there is also a larger philosophical question at stake: can and should we bring an end to the era of “vertiginous pay”—and, if we do, what might replace it? Let us know your own thoughts below.
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The simple fact is that the city are a pack of hounds
( sadly , as rumour has it , sometimes perverted by cocaine ) keenly following the scent to success laid by the cunning snake oil salesmen who, by copying the dreaded “numbers not people” one-size-fits-all template of American firms such as MacKinsey & Co, first introduced the smoke & mirrors of market research / business / management / financial PR consultancy culture to an unsuspecting British Isles during the late 1970’s
Because most of it is ’spin ‘, calculating the long-term effects for those companies ‘ man conned ‘ into following the “target” and “focus group” poppycock
of these expensive reviews ; suffice to say, many are now going bust
The government are using Sir Fred Goodwin as a PR exercise ( signature Mandleson ) to avert attention not just from the financial crisis but more
importantly from their own truly disgusting habit
of pilfering tax-payers hard-earned money to fund
their property portfolios whilst pretending to be
caring socialists
( We’ve yet to meet a socialist not residing in rented accommodation on a social housing estate on
a full-time basis , risking only public services
and public transport, who is anything but a complete fraud ; can anyone tell us why Tony Blair was dancing at the Mayfair nightclub, Annabels, as Gaza burned on New Year’s Eve ? )
Founder of one such business consultancy, SRU Ltd, Got-rich-quick former HBOS chair Lord Dennis Stevenson ( former employer of Mandelson knighted for his firms pivotal role in helping Tony Blair & Gordon Brown pick the locks to Downing Street ; now chairman of the House of Lord’s Appointment Committee – easing who can and who cannot get in ) whose media interests alone might be enough to have him up in front of a less corrupted competition commission, will have been by far the most experienced and qualified businessman to fully understand the bad business model culture ( utilised world-wide – hence global crisis ) and therefore, it could be argued, worthier of intelligent media analysis than Sir Fred, who probably feels this appalling government do not deserve his money ( which anyway seems mere when
compared to, say, the BBC salary of Jonathan Ross )
Meantime , since the National Office of Statistics
( not to mention Prospect ) has irrefutable evidence proving New Labour are the least trustworthy group
to have their Fagin-like fingers in the public purse since the Sheriff of Nottingham, one happy ending for the RBS tale would be for Sir Fred to stick to his principles and donate his pension pot to a charity,
such as the Prince’s Trust, which really does help Britain’s most deprived young people, with a track-record to prove it
If anything the current crisis has reminded us how critical banks and bankers are to our lives. The question is: How do we re-establish a banking industry that sustainably serves the broader economic interests of all.
The revelation of how acutely self serving the culture of bankers and banking has become has come as a shock to many. However having worked my whole life in the city I know that the majority of those I have worked with understood they were there to extract as much money as they could for themselves as quickly as possible. We knew we offered less to society than a surgeon or an architect. We even new we offered pretty low value for money to shareholders and clients- but that was never the point- Even though we did work hard, loosely structured performance related remuneration allowed us to secure frankly ridiculous amounts of money to do pretty average work. I have always found it surprising that people ever lapped up the idea that we should receive extra money for just doing our job properly. Also, as we all knew, superior returns were more often than not based on a)good fortune, b)under pricing of risk and c)simply being around during one of the longest periods of economic growth in global history. Find me those superior returns now that risk is being repriced and we have global recession- perhaps revealingly we are now left solely reliant on our skill and good fortune, and its not a pretty picture.
What is perhaps more astounding is that it has only been since the government has arrived as a majority shareholder that anyone has thought to challenge the idea that we should keep getting healthy bonuses even if we are losing money on a grand scale. It very much illustrates how shareholders have totally lost control of the companies they own to their executives. As new governmental owners make moves to re-establish shareholder control the range of bizarre executives responses have only gone to reveal just how over-extended their collective sense of entitlement has become. Frighteningly -if anything- the media underplays the level of hubris amongst mid to upper management. It is not a secret that some very well remunerated managers in government bailed out banks have been threatening to walk while actively leaving chaos in their wake, unless they get a substantial bonus. The argument being that these remuneration levels are low relative to the sums at stake. I think in Chicago in the 20s they used to call this kind of racket a ‘Shake-down’.
The sooner this disastrously damaging culture is broken, and errant managers and executives are brought to heal or shown the door, the sooner we might feel more optimistic about a achieving a banking industry that serves our broader economic interest. Tighter regulation will help restrain the worst excesses, however it will never establish a change of attitude. Besides the city is rightly confident it will always manage to be a couple of steps ahead of the regulators. Ironically Thatcher very clearly showed us what needs to be done when those working within a whole economic sector form a self interested cabal that threatens our wider economic interests.
- You make it very clear to them that if they do not quickly adjust to the new status quo they will not survive.
- Encourage the introduction of new entrants who offer better value for money, and a more sympathetic business culture.
- Help re-establish strong active shareholder control.
It will then just be up to individual bankers to decide whether they really do just want to walk away. I would suggest our banking industry would be well rid of those who do.