I must admit I have a real issue with the debate that’s currently raging about bankers pay.
The issue I have is this: I can’t work out what’s right and wrong because both sides have got it so badly wrong that they managed to break the world economy.
On the one hand it’s outrageous that the banks still aren’t lending properly to Enterprise Britain, despite the fact that it is our money that bailed them out. Of course, the banks strenuously deny that they’re not doing their bit. But the fact is that businesses are still be starved of much needed liquidity because banks aren’t lending.
On the other hand it seems wrong in the extreme for a government to set pay levels in a commercial and private organisation – especially as it was them that got the regulation of the markets so badly wrong.
I used to be a banker and it’s undeniable that you need real brainpower to run an organisation of such complexity and magnitude. Capping pay in the way the government suggests risks backfiring in a big way.
Reduced rewards will lead to the best people being attracted elsewhere and with sub standard management the cycle will be repeated PDQ.
But bonuses that reward failure, excessive risk taking and all the other bad practices that have led to the predicament we all find ourselves in are also offensive to those of us in EB who are now dealing with the crap left over by the bank’s earlier greed.
So what’s the answer?
Well, in HR we always say that if you measure something you tend to get it and bonuses are simply a way of measuring success.
The answer, then, is to get the measurements right and this is where government can legitimately be involved. They should set better measurements and, if they feel the need, stipulate that bonuses should be paid out against these measurements.
It’s regulation taken to the next level.
If the measurements are correct and safeguard the financial system (and that means taking some risks, too) bankers bonuses will paid on their ability to be good bankers, not excessive profit takers.
It also means that government doesn’t have to be involved in the level of bonus paid in a commercial organisation, which is wholly wrong.