What’s a man worth? When it comes to Stephen Hester, chief executive of RBS, the answer is about £950,000 less than his own employer thought, it turns out.
The baying idiots in large parts of the media, aided in their lunatic cause by opposition politicians determined to make much needed short term gains and abetted by a spineless government whose attitude threatens to destroy the value of taxpayer assets, have put the CEO of one of the UK’s biggest banks under intolerable pressure.
Hester, with better grace than might have been expected under the circumstances, has now given up the £950,000 stock bonus that the bank had last week decided to award him and to which he was therefore contractually entitled.
There are many who should be ashamed at the outcome of this sorry saga. Hester is not among them. And nor would he be even if he had agreed to be paid what his employer had deemed fit to pay him.
The reaction among those who work closely with him is disbelief. The image they have — based on observation rather than self-righteous ignorance — is utterly at odds with Hester’s demonic portrayal elsewhere.
They see a man who took the role not for its compensation but in part through a sense of duty and, yes, a love of the challenge. They see a man who has skilfully navigated the tricky quasi-public sector world that RBS inhabits in order to ensure that the bank has a fighting chance of generating a return for taxpayers on their enormous investment.
They see a man who has been let down by a government that had a duty to not interfere with his contractual arrangements for as long as they were content for him to remain in his post. And perhaps most importantly, they see a man who has sought to bring the firm under control, slashing the balance sheet, cutting unprofitable businesses, and scaling back the group’s global ambitions.
This is the man, they note, that was brought in to fix the problems, not the one that created them.
Such outpourings of support don't happen that often. The fact that Hester’s colleagues also routinely describe him as “difficult to like” only makes their admiration for his achievements all the more meaningful.
The majority state ownership of RBS makes rational debate of the compensation issue much more challenging. There are plenty who will see the correct role of government in this situation to be that of the meddler — shaking up the system from within.
This view is understandable, and to a degree defensible. All too often shareholders have been content to be passive observers of the companies they own. Such an attitude contributed to the lack of scrutiny that has allowed excessive risk-taking to flourish in the past.
In the case of RBS now, however, a careful balance is needed between guiding the behaviour of the firm and ensuring that it is not prevented from being competitive, all the better to be able to generate a return for the taxpayer. This is all the more important given the explicit promises at the time of the establishment of UKFI as an arm’s length body to manage the taxpayer’s interests in bailed out banks.
And contracts matter, by the way. Those who have forgotten this might do well to attend the Royal Courts of Justice over the next few weeks, where 104 bankers from Dresdner Kleinwort are seeking to convince a judge that Commerzbank has a duty to pay them what they say they are owed. If such things must be contested, that is the proper forum for it to be done.
It's the stupidity, stupid
One thing is clear: to allow the debate to become focused on one individual was unforgivable.
It’s fairly easy to know whose stupidity to lament more. The media, one supposes, might be expected to adopt an ignorant and sensational approach to the rather complex issue of why different industries place wildly differing monetary values on the efforts of their workforce.
In this respect at least, it has not disappointed. The scope of the term “gutter press” is broadening by the day.
But the lion's share of criticism must be levelled at the government, which has indulged in the kind of populist opportunism that is the hallmark of a weak administration. How its strategists must have rejoiced when they realised how they could casually abuse a captive target as a way of furthering their “moral capitalism” agenda.
In doing so, they have seriously damaged the prospects of RBS being able to compete. Some observers dismiss such talk as desperate self-preservation on the part of bankers. This ignores the inconvenient fact that RBS CVs are piling up on the desks of those running rival investment banks — and they expect to see many more in the wake of this fiasco.
It would be surprising if, in time, those CVs did not include those at the very top of the firm. Those working with Hester say he remains committed to his job in spite of the public mauling he has received. But it can only be a matter of time before even he thinks better of it. Others, including John Hourican, the man tasked with fixing the investment bank, are already finding themselves in the firing line. Morale is deteriorating fast.
That Hester was known to be relatively uninterested in seeking further wealth was one reason why the UK government was able to attract him to the RBS role in spite of it paying at the lower end of the industry range for such a post. There were few other candidates then — there will be even fewer now.
There may be a legitimate — if rather self-indulgent and probably fruitless — debate to be had over inequality of compensation in the world today. There is perhaps a more meaningful question to be asked over whether the oft-mentioned globally mobile talent pool for senior banking executives really justifies a different approach to compensation than in many other industries.
But this is not the debate that has been conducted over the last few weeks. What has taken its place is a demonstration of the sordid politics of envy. There is plenty of talk of a moral victory. The reality is anything but.