Bankers Bonuses: at last!
Time for the Annual Bankers’ bonus; at last!
Many may feel that this year it is time for celebration as one bonus, for one banker, is not taken up. But this bonus was only one relatively small part of his overall annual package. Calculating next year’s “package” may already have started.
The package is so complex, containing shares and cash, spread over future years; that 3 or even 4 bodies are involved. These are the remuneration committee of the bank, the Treasury, and UK Financial Investments, (UKFI). Also, the Coalition Government is involved as it could intervene in this case, but has not done so. The Labour Party is involved as it set up the UKFI when in power.
UKFI controls 67% of voting shares in the Royal Bank of Scotland (RBS). So the UKFI members of the board of RBS could have controlled decisions about all bonuses, and even the whole package. Whatever effort to control the bonus of Stephen Hester, the chief executive, was made it was not able to stop it. Although set up by the Labour Party to create an arm’s length body away from government, it is now answerable to the Chancellor of the Exchequer. This raises questions about the ultimate authority involved in UKFI decisions.
The member of UKFI responsible for RBS has recently spent 17 years with Merrill Lynch. The strategy of UKFI is “to create and protect value for the tax payer as shareholder”. The strategy has no mention of managing bankers’ bonuses.
The problem for the government is that if it micro manages the bank, then it may be perceived by the voting public as responsible for any failure by the bank in future. But the majority shareholding the government has through UKFI means that avoiding blame may be very difficult.
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