The recent news that the Royal Bank of Scotland’s chief executive, Stephen Hester, has turned down a one million pound share-only bonus has been paraded as a victory by the media – but a victory for whom? Are there any real winners in this debacle?
The bonus in question is a share-only payment of around £963,000 given to the RBS CEO for his work in stabilising the troubled bank and making it a “less risky organisation” in the 2010 fiscal year. Despite being seen as excessive by many, Hester himself seemed happy to take the bonus, while the government stated that it would not block the reward. This is despite the fact that the bank is majority-nationalized and 82% is owned by the government due to a 2008 bailout. However, Labour’s desire to take the bonus to a parliamentary Commons vote – and the belief that MPs would vote against it – meant mounting political pressure lead to Hester’s acceptance of the bonus as untenable, resulting in him waiving the bonus. A story with a happy ending then?
Well, in reality, no. Firstly, Hester may receive another award under a different financial scheme, known as the long-term incentive plan, where he could earn up to four times his £1.2million salary. Hester picked up £7.7million last year. However, more importantly, the fiasco itself only serves to reveal the underlying problems that the current capitalist society experiences: of a government too tied in with financial capitalist corporations and unwilling to fight the banking system that determines its economic stability.
To start with, the fact that David Cameron refused to block the bonus is unbelievable. This is an extra share payment of 1 million pounds on top of an wage amounting to around £1.2 million. To put that in perspective, that is a salary 46 times that of an average worker of the UK. Not only that, but RBS also recently announced it would be cutting another 3,500 jobs, bringing the total job loss since the credit crunch to 11,000. How a government can justify refusing to stop a bonus of £1 million to one man – who is essentially a civil servant – running a company, that is both state-owned and cutting jobs, is beyond rational belief.
In fact, it shows a government completely out of touch with its voters – especially as it seems to hold the belief that this large payment would go unnoticed and undisputed by the general public. This, coupled with the recent Private Eye scope (that Her Majesty’s Revenue and Customs has issued billion pound tax breaks to certain companies) shows a government no longer looking out for the general public, but instead there to line the pockets of a economic elite. It shows a government that cannot and will not stand against major capitalist corporation, which can essentially hold the government to ransom. In fact, there was a fear that Hester and the board would have quit over the issue, if the bonus had been vetoed, due to an agreement that the bank would be self-run without government intervention. Who has the power in that relationship then?
The second issue it reveals is in banking and business itself. To concentrate on Hester alone is unfair; it was revealed in the last year that RBS has paid 323 key staff a collective amount of £375million, more than a million pounds each. Generally, rewards such as bonuses are given for doing something extraordinary – for example, meeting higher profit targets – that is above and beyond the job you get paid to do. In banking culture bonuses are rewarded purely for doing your job; for the duties that you are expected to do. Hester was employed to deliver stability to the bank and he did so; why does that necessitate a further reward? Especially considering the fact he was being paid over one million pounds anyway. Other jobs do not receive such benefits; teachers don’t get paid bonuses purely for turning up to class, nor do doctors for saving people’s lives. For bankers, these rewards are seen as an entitlement. It reveals an ever-widening gap between what is believed to be acceptable in FSTE-100 boardrooms compared to those in general employment.
Some have argued that Hester deserves such rewards for his work. He is, no doubt, only one of select group who are equipped with the resources and experience to deal with the problem that RBS is facing. Furthermore, it has been argued that the bonus is small compared to those that other Bank’s CEOs will earn. This is such a poor argument though, because the banking bonus system is systemic throughout. The fact that others will get bonuses in the banking system is irrelevant, because its entitlement culture is wrong in the first place. These men and woman are living in a fantasy land that justifies such payments. It is essentially like justifying committing a crime just because you live in a run-down economically-poor area. It may be expected in the circumstances and context, but that does not make the actions morally right. A bonus – especially in a time of economic stagnation and austerity – to a man who owns a 350-acre estate in Oxfordshire, a Swiss ski chalet and a home in Holland park is indefensible. And the debate about whether Hester has done a good job is debatable at a level far higher than I can comprehend, but considering the fact that RBS’s share values have plummeted this year it is reasonable to assume that Hester’s work has been satisfactory, not excellent.
Who then, is this a triumphant result for? The only real victory may be for Labour – and Ed Miliband – as it has shown that the party leader is slowly beginning to exert his influence with the scalping of Rupert Murdoch and now of ‘Hestergate’. Yet, it was the Labour Party who agreed the bonus to RBS’s chairman Sir Philip Hampton, despite the fact that he never requested it – although he did turn down his bonus in a more gracious manner. Moreover, it’s easy to stand in opposition to the government on what was an straightforward political debate.
In reality, there are no winners – this occurrence is just the icing on a very large cake. In fact, a double-deckered cake: one layer revealing an out of touch government elite and the other a greedy banking system. All in all, it seems hard to see where a solution can be found.