We’ve had the Arab Spring, is it now time for a pay revolution in the City of London?
Poor old Stephen Hester: apart from the day job, he has the development of the arboretum at Broughton Grange, his 350-acre Oxfordshire estate, to keep him busy. Now he finds himself at the centre of a political storm about his share bonus of nearly £1 million, to add to last year’s million or so salary. His boss Philip Hampton voluntarily gave up the £1.4m share reward he was due later this year. Now Hester has followed him although there is some talk that Philip may not have been entitled to his after all.
Hester found himself personifying a problem with British corporate life to the extent that he worried about becoming a pariah, though I doubt that Hester’s decision is going to stop the debate. The question still remains, just how much should employees in banks and, more widely, big corporates – ultimately owned by pension funds and by all of us – be rewarded for their efforts, and how should that be decided?
In my blog on 6 January, Vince’s Big Idea: Shuffle the Chairs, I stated that FTSE directors on 100 times the average salary were, to my mind, not necessarily good for building a more inclusive society, or successful economy for that matter. Of course, changing the status quo is not an easy task, but isn’t that where leaders come in? Isn’t it what leaders do; take us somewhere we might not have gone on our own?
While we British accept the stabilising benefits of inherited privilege, it seems to be built into our DNA; we also want to feel that the people at the top are not getting too carried away with themselves – that we matter too. There is certainly no mistaking the groundswell of opposition to bankers’ pay at the moment; because a lot of people think they have taken their eye off the egalitarian football.
Ed Miliband has I think come into his own on this subject and his tactic of calling for a vote in parliament seemed to work. I have nothing against Hester. I’ve never met the guy. But interestingly for us and unfortunately for him, in RBS we have a much more direct ownership locus than other FTSE companies and, directly through our elected leaders, we can still take a stand on boardroom excess.
I think it would be very interesting if a political leader went further and took a stand on just what a fairer, more inclusive, society might look like. Perhaps a vision for a fairer nation that said in government jobs, the BBC (in fact, I think the corporation has already got the message on this), banks and most businesses, the cap on remuneration, of all sorts, should be 50 times the average salary. If it was in a manifesto, I think a lot of people would vote for it.
I firmly believe that many people paid 100 times the average salary today could be replaced by excellent people prepared to work for just 50 times the salary. I think we would have a more dynamic and certainly more meritocratic set-up, and possibly an even more successful economy as a result. If this meant that today’s highly paid bankers and the like went out and proved their worth by starting new businesses that would be a good thing too.
The British have always been good at recognising the writing on the popular wall and this is not going to go away as a political issue. It’s something we need a leader to do something about and the sooner the better.
The Arab Spring came as a bit of a surprise to many; it showed us that it is unwise to suppress public opinion for too long. Of course this isn’t the same thing at all, but I wonder what springtime in the City of London’s remuneration committees will bring?