It used to be that the hunting season began in August, on the ‘glorious 12th’, with Grouse, before moving onto Partridge and Pheasant. Nowadays, however, it begins several months earlier with Bankers bonuses. A hugely political hotbed, fuelled by politicians (who have demonstrated absolutely no moral compass when it comes to remuneration/expenses) and tabloid media (from whom even the reported date has questionable factual content).
Cue Stephen Hester who had the sheer audacity to accept a (reduced) bonus awarded in return for his performance, under the contract set up by the very people who have spent days criticising him vehemently (see the ‘moral compass’ brigade above). The same people who have now forced him to waive his bonus.
This is a bad thing. Leaders need to be left to lead, not interfered with by people who sit in a position of ignorance, repeatedly reminding us why they are unable to lead. Anyone else accepting a position under specified terms would have cried foul if those terms were suddenly posthumously altered for political gain – heaven forbid if it happened to a unionised worker, the stampede following the call to walk out would have been deafening.
I had a bonus refused to be paid last year from my (now former) employer. No reasons, just a load of excuses. The detrimental effect was immense. Most bankers are perhaps not as beholden to their bonuses as I was last summer, but to have a bonus removed despite (over)achieving will cause fall-out. RBS can’t afford for its key talent to depart to competitor businesses.
Hester has been widely credited with doing a very good job. He wasn’t part of the old guard at RBS – a small matter that has got in the way of the salacious reporting, politician posturing, tabloid pomposity and subsequent ignorant hysteria. He was hired to run and turn-around a thoroughly knackered bank, a bank that had been decimated mercilessly by a number of people (largely self-serving bankers, usually fuelled through greed but also including Teflon politicians amongst the mob).
Despite new capital rules introduced by global regulators changing the economics of Investment Banking virtually neutering one of the RBS’s prime profit generators, and the difficulties imposed by the Independent Commission on Banking to split banks (and of course the small matter of the Eurozone crisis bringing share trading to a virtual standstill as well as killing off deal, IPO, fundraising and M&A activity) …..He has returned the bank to a multi-billion profit. That is good news.
He has re-focussed RBS’s operations; divested many of the non-core assets that partly led to its over-exposed downfall; trimmed a mass of excess; and reduced it’s balance sheet by £600bn (not £600m as several pot-shotters have mistakenly said – more reasons as to why not everyone can run a bank).
When Stephen Hester took on the poisoned chalice role, he did so on a significantly lesser remuneration than he could have gained elsewhere. This man, who with a humble background, educated through a comprehensive school, has worked bloody hard to put himself in the exceptionally exclusive club of people who really *can* run a global financial services organisation.
He also had the guts and appropriate attitude to take on this largely state-owned (read that as continually ‘politically interfered with’) bank and turn it around, arguably the UKs single biggest barometer of the financial services crisis that triggered a global meltdown.
He took on the job that he could never win at. No matter how quickly he restructured the bank, restructured the balance sheet, restructured the operational structure….and returned the bank to the level of performance and profitability that gave it its position as one of the very very few genuine UK Blue-Chip companies (to say nothing of returning to it’s gargantuan tax payments).
Having done all that, he was still being vilified for accepting the already reduced bonus he is rightly owed…..a bonus that wasn’t a bonus anyway – it was a share award, ensuring he had a vested interest in the long term position of the business. A vested interest shared by all 60 million ‘shareholders’, the UK General Public.
And the final ignominy, he had Ed Miliband and a bunch of other bandwagon-jumping rudderless politicians and left-wing ignoramuses turning their perpetual whinging on to him (which would be reason enough to accept the bonus and collect the share certificates with two fingers).
Politicians tried to cry that Hester should ‘remember’ he is little more than a quasi-public servant and as such, should refuse his bonus accordingly. Shame such a strong moral stance from full-public-servants didn’t rear its head during the expenses fiasco. Will these same politicians put yet more pressure on genuine public servants to waive large elements of their remuneration?
Large organisations need good, strong, resolute leaders. The bigger the organisation, the bigger the leader needed….the bigger Kahuna needed. As an RBS shareholder, I had great respect for Hester for sticking to his guns and taking his bonus (Unlike RBS Chairman Philip Hampton who has played the political game and refused the £1.4m bonus he wouldn’t actually have been awarded). Hester’s pre-interfered-with strength and resolution of leadership is a trait that RBS crucially needs right now.
Hester has further demonstrated his strength of leadership by sticking to his guns over lending. The (clearly well qualified) media cite RBS’s lack of lending as a failing – ignoring the fact that lending has increased massively…and forgetting that lending to less ‘appropriate’ businesses/people was the catalyst that led so many banks into meltdown across the globe. So much for political ability in business.
With every ignorant voice coming out of either Westminster House, Whitehall, ‘Fleet Street’ or Union Offices crying for political intervention, they were missing two vital elements – firstly, UK politicians are, with very few exceptions, stupendously unsuitable/incapable to run businesses (they are largely incapable of doing their own jobs). Secondly , the UK Government has just spent an age Vetoing an EU treaty to protect the City as a hub of global capital – to then seek to heavily influence (nay interfere with) a global bank is beyond hypocritical.
RBS has a very good leader in Stephen Hester. He costs them, handsomely. But he is still working well below his market rate and is repaying his comparatively modest remuneration many times over. He needs to be left to do his job.
The risk is that letting the Ed Miliband’s of the world (whose leadership prowess is at the opposite end of the scale) have a voice, is that Mr Hester may just call it a day and leave to return to the arboretum on his now famous 350 acre Oxfordshire estate….and leave RBS (and the taxpayers investment) to flounder.
Miliband will claim credit for this, his gloating ‘interests of the British people’ message just show’s further how out of touch he is with the nation, let alone his own party. It is in the interests of the people that Hester turns up this morning and does a good job rather than dreaming of his arboretum whilst thumbing through travel brochures.
In the current economic climate, businesses desperately need strong, motivated, competent leaders. Look at the vast number of businesses that have failed recently, especially the number of retail businesses, one of the common themes has been lack of strong leadership. Conversely, the businesses that ARE thriving in a tough market are those who do have strong leaders.
But strong leaders need rewards, and that includes financial rewards. In a world of supply and demand, the rewards get greater for the better leaders. The same argument is used for footballers – how can a 25 year old be worth £10m per year when a leader of a global bank (and cornerstone of an economy) be derided for earning a fraction of that figure? Even managers of some footballs teams earn more than Mr Hester – before the bungs.
Bonuses figure in all walks of life. Docklands train operators have recently been award a (politically supported) bonus for achieving….nothing…or at least nothing beyond turning up to work. If a greater political authority suddenly came along and removed their bonus, there would be uproar and (yet more) union calls for mass walk-outs.
When the people concerned are business leaders, the stakes are higher in all regards. “Pay peanuts, get monkeys” is an overused phrase, but talent costs both in terms of attracting but also in retention. I have spent a large part of my professional life finding outstanding talent; outstanding leaders for businesses.
Too many people major on the minor things
All but the smartest businesses get too hung up on comparatively small details. Wanting the best, but arguing over tiny percentages of the initial costs. I have had businesses jeopardise the recruit of key personnel; individuals tasked with £multi-million deliverables, by choosing a recruiter based purely on cost – seemingly saving a couple of thousand pounds….until they have to re-engage a proper head-hunter to rectify the poor job delivered, or not delivered as the case may be.
RBS are lucky to have Stephen Hester, and they know it. His peers earn far more for doing far less, and with far less resolve. Only the lesser qualified (or more ignorant) individuals fail to see the need for strength of leadership and importance of the job strong leaders do.
Having presided over the ruination of RBS and others, and now interfering with (and bullying) the very people brought in to clear up the mess, politicians need to get back to their own jobs and leave the proper leaders of the country to do theirs.