Yet again you are the prisoner of your own promises. The pay of Stephen Hester has become a running sore despite the fact that it is relatively modest by banking standards. It was of course pretty daft to promise to sort out excessive pay without either defining what that meant or putting in place any tools with which to do it. In a capitalist society tools are in any case very limited without forcing companies out of our economy.
It seems the red tops are pushing you towards a corner marked '£1m salary cap' and you need to counter this before the only choice is a damaging u-turn which would harm the UK economy. In the context of solving the immediate problem, we do not have time to create social enterprise banks to compete with the purely commercial ones, although of course in the long run this is the answer. A wholly state or community owned bank could reward very differently and still attract sufficient talent.
In the current situation however you have a very limited set of choices. My favourite would be to peg Hester's pay (and the rest of the Board) to an index of other comparable bank pay, with a mechanism to ratchet the actual rewards based on performance. That would not just be on share price or profit, chasing those is what got Fred into trouble. It must be a range of indicators around customer satisfaction, cash generation and so on. If Hester can turn the bank into a cash cow, feeding money to keep our tax down I don't think his salary would be news any more. It seems to me that at the moment there is no meaningful link, in the eyes of most people, between performance and reward. Restoring that might well get you out of the corner without having to use a bat or compromise capitalism.
No comments:
Post a Comment