Self-serving world of finance

Feb 25 2010 by Iain Laing, The Journal

BRITISH banks seem to be a little more restrained than their US counterparts.

The chief executive of Lloyds Banking Group Eric Daniels has decided to waive his £2.3m bonus for 2009.

It is reported that he is concerned that a row over such a bonus might distract attention from the “excellent progress” made by the bank over the past year.

Well, perhaps. And perhaps he is also concerned that it would have led to him being strung up from the nearest lamppost.

Meanwhile, Royal Bank of Scotland chief executive Stephen Hester has shown similar moderation in foregoing his bonus, thought to be worth £1.6m

On Wall Street, on the other hand, cash bonuses for bankers rose by 17% to US$20.3bn, according to data from the New York State authorities.

This does not include bonuses which have been taken in the form of stock options.

Maybe British banks have been influenced by the singer Billy Bragg who has threatened not to pay his taxes in protest against bonuses being paid out to RBS, which is 84% taxpayer owned.

In passing, I might say I have often wished I could withhold my taxes in protest at the way in which Government chooses to spend them, often on schemes, which, I suspect, are dear to Mr Bragg’s heart.

In a very half-hearted defence of the banks, I would also point out that many of these bonuses are paid to traders and essentially form most of their salaries – in the same way that salesmen are paid commission.

But that doesn’t excuse the rest. It does not, for instance, excuse the £2.5m RBS’s Sir Fred Goodwin reportedly received in salary and bonuses in 2004, or the near £600,000 he cashed in from the “medium-term incentive plan” the year before.

In Mr Daniels’s case the remun- eration committee agreed that he deserved his bonus for his “significant individual contribution” and the group’s overall performance.

I would have thought that, given his base salary of almost £1m, had he not made a “significant individual contribution” and had the group’s overall performance been less than brilliant, he should have been summarily dismissed.

But that only happens to the poor bloody infantry; the same rules do not apply in the incestuous, self-serving world of mutual back- scratching remuneration committees and pension fund shareholders.

:: Peter Jackson is a freelance journalist and former Journal business editor p.jackson77@btinternet.com