I just love following the news at the moment. The press must be bored out of their minds. The issue this week seemed to be salaries. Should we regulate salaries? Well I hate regulation so the answer is unequivocally no! So what am I writing about?
Well that is easier. The discussion was about the vast salary the new top man has at RBS. Perhaps I should say salary plus bonus package, but lets face it – he will get the bonus anyway. The argument goes that RBS (and now of course the tax payer) has to pay that kind of money to get ‘quality’. Now I find that an interesting line of reasoning. His predecessor, Freddy X got considerably more I believe and I hear nobody fighting his corner on quality. So is there a link between level of pay and quality?
Well, the whole gang that helped create the credit crunch was paid the kind of money and interestingly in much the same way – good performance leads to good bonus – as the new Bossman of RBS. What they are really saying is: good performance leads to good bonus as long as nobody figures out in time what is underlying the performance. And whilst on bonuses, perhaps you should read what Jack Welch wrote many years ago about the acquisition of Kidder Peabody – he saw the light then!
Well I wish Mr RBS Bossman all possible success, but I am sure there are many people who could do the job he is doing. I do not believe that simply throwing a bucket of money at the job got RBS the best person. What his motivation was and why he was chosen I do not know, but I suspect the financial discussion was the shortest part of the interview. I also suspect there are lots of people who could do a good job at RBS and who would jump at the prospect of restoring order to what was once seen by many people as one of the strongest and progressive banks in the world and that includes our regulators.
So then I came across an article about Mr Peter Hendy. Mr Hendy is basically a civil servant who runs Transport for London. For those of you who do not know, this is the transport operator of our capital which manages to ensure we have the highest public transport fares in Europe and possibly in the world, but other than that I love it.
Now Mr Hendy has given up half his bonus. According to this article (and I did not verify it) he was due a £136,000 bonus on top of a basic salary of £348,000 and he decided he would only accept £61,000 of the bonus. Put in simple terms, this generous civil servant has accepted a bonus of a mere 2 to 3 times average wage in the UK. Fortunately for Mr Hendy, unlike for Enterprise Britain, his final salary pension scheme remains fully in place, so no worries there then.
So did Mr Hendy only come to TfL for the money, or is he in fact paid too little? After all Mr RBS has a basic salary of about 3 times that of Mr Hendy and a bonus package, which he does take, eclipsing Mr Hendy’s? Does that make Mr Hendy the monkey? I don’t think so. Mr Hendy is no doubt very capable and doing a fine job, but once again I think there are many people who could do a fine job there. The question even arises whether someone with the talent to lead a complex and political minefield like TfL would not have the talent to lead RBS through the change it needs.
I have no doubt both these men work hard, are very capable and well deserving. But they do not create the jobs Enterprise Britain does, they do not take the risks Enterprise Britain does and they do not suffer the abuse from tax people, bankers, government and business angels that Enterprise Britain does. So whilst I wish them well, don’t tell me that high pay gets the best people –there is no proof of that. Even UK Financial Investments, which is supposed to look after the money we all were forced to invest in RBS, said they put together a package that was in line with the CEOs of other UK banks – and we all know how much we love them and how capable we think they are! Perhaps they could organise another credit crunch, some recession, and as many job losses as they can muster.
The basic rule is still simple – avoid recruiting a monkey unless that is what you are looking for. Neither money nore regulation will protect you otherwise.