Monday 6 February 2012

Boring old democracy!

I'm not sure it was an entirely sensible decision to listen to the Today programme as I sat on my cypriot hotel balcony with my coffee. The sun was  shining, the sea lapping invitingly beneath me  ( the news of impending snow in London added to the enjoyment) but my blood pressure must have shot up as I listened to the exchange between Angela Knight and Polly Tonybee on top pay.

This was prompted by the Times front page story that top bankers from around the world have accused politicians here of " pandering to public opinion". Politicians listening to the people! The very idea! In the world in which such people live I suspect the dreary business of democracy must seem a distraction. How much this sums up the problem . The arrogant sense of entitlement and the outrage in banking when they are challenged to behave responsibly is the real problem.  And I wonder how many of these self same people, expressing such contempt for the democratic process , sign their names off on the company " corporate social responsibility" statements? Did you know that , for example , in 2010, 5 employees from Barclays cashed in on pay and bonuses double the size of what the company invested in communities worldwide (£110 million to £55 million).

 Polly was spot on in challenging Angela. Until those in leadership positions understand why the people are so hacked off with the behaviour of those who run our boardrooms we will not make progress. There was an excellent article on bonuses in the FT on Saturday  by Andrew Hill. He pointed to the Harvard Business Review's Mihir Desai who argues that market based compensation in the US inflamed a " giant financial-incentive bubble...such remarkable winfalls have given rise to a sense of entitlement that burdens us still ". And he quotes an academic who argues that  the circle of people who make the decisions on top pay benchmark themselves against " a limited population of elite salaries" .

An opinion piece by Martin Dickson in same FT argues the current banker bashing is tempting,but wrong. However, remarkably he  writes ; " the public is right to be furious with the banking industry . It's folly , ignorance and absurd risk taking against a background of extraordinary regulatory laxity played a large role in getting us into our economic mess. Arrogant bankers, insulated from reality were slow to take any responsibility for the crash or accept that their lavish  pay and profits turned out to be underwritten by an implicit government safety net.  Heads I win , tails the taxpayer looses. " Couldn't have put it better myself. A thought for the day for The British Bankers Association newsletter perhaps? It is not just that the excesses of the financial markets led to our current recession and the pain that it is causing for the millions unemployed or those who will suffer from cuts in public spending , but also this arrogance and sense of entitlement demonstrated by top businessmen attacking politicians for listening to the public that so enrages.

What is needed is leadership that reflects on wrongs committed and a desire to reform. Martin Dickson goes on to argue that rage makes a bad guide to policy making. True ; to an extent. It is right we have a debate on boardroom reform and top pay. But to do so we need businessmen and bankers to understand the rage and accept their part in our common misfortune. And it is no good bankers like the Chair of RBS, Sir Philip Hampton ,  calling for reasoned debate on the one hand and then denouncing what he describes as " witch hunts" , hysteria and " mob mentality " on the other! Sir Philip , is this " mob" the British people? The taxpayers who saved your bank from collapse? Such a disdainful attitude to your shareholders is hardly wise. However to be fair he does also say, " "Essentially, particularly in the banks, particularly in the investment banks, shareholders have done pretty badly and employees have done pretty well. That needs to be corrected. " he admits change is one needed in top pay. But he , and other bankers would so well to listen to public opinion , not attack it. We do need to reward strong business performance.

We must attract talent at the top. Bonuses , and large ones at that , may well encourage  strong performance .  But they are now well out of kilter and seem rarely connected to performance. It is also right to remember that the financial industry contributes to the economy and creates jobs.I suspect that many people who work in the banks on rather less lavishly paid salaries are as enraged  by the antics of their bosses as we are.  The anti democratic mutterings of their bosses must be a source of embarrassment to them too. In theological terms forgiveness can only come after repentance Martin! So absolution for the bankers may be some way off. And the more they absurdly complain of " bank bashing" the greater the difficulty they will find themselves in. Removing the moat in ones own eye is good advice before preaching to others on the evils of governments' listening to public opinion. So the Government must continue to demand reform. Not just on pay but on how we run our boardrooms. Cameron and Miliband have been right to argue for more responsible capitalism. Now the bankers and business folk who are so loudly complaining must listen. And a final thought. As Bob Diamond from Barclays contemplates whether to take his bonus, how about generously donating it to charity ? What might make a difference is if  Bob and colleagues  spent a week with , say Richard Hawkes at SCOPE and saw how the lives of people with profound disability have been affected in the recession with cuts by  government to their benefits and cuts to their services by councils. Then perhaps they may get an inkling of the anger many in our sector feel at the banking and financial industry. Then let's have a debate on top pay.

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