It is impossible to underestimate just how out-of-touch the UK’s top bankers are with the rest of us. Consider the case of Lord Jones, chairman of HSBC’s advisory board. He’s cross that people aren’t being nicer to bankers. He’s particularly upset that, despite the fact that a couple of them didn’t take bonuses in 2009, “not one jot of praise… came their way”.
Hmmm. To me it rather looks like he has this all the wrong way around. Why would we praise someone for not taking an undeserved reward? That’s the way it is supposed to be. Most people consider a bonus to be something you get sometimes for doing particularly well, not something you get every year however appallingly your business might be doing. We’d call the latter thieving from your shareholders. So to praise this lot for not taking a bonus in a year in which they were in part responsible for a global credit crisis, and in the process of being bailed out by taxpayers, really wouldn’t make much sense.
However, in all the fuss about the ludicrously self-centred behaviour of the financial services sector, we are forgetting that they aren’t the only ones thieving from us. Stand up UK corporate bosses. FTSE 100 bosses now earn 88 times the median wage. That’s up from 47 times a decade ago. Their total rewards also rose 55% last year, to an average of £4.5m.
CEOs and the remuneration committees they are in cahoots with would have you believe that all this cash is reward for excellence. They’ll also tell you that if they don’t get paid millions and millions, they might get lured to work abroad – and that they are not getting one jot of praise for being so good as to stay.
Both of these justifications are nonsense. The first because it isn’t at all clear that the excellence exists: over the last ten years, at the same time as we have allowed CEO pay to double, the FTSE has gone sideways.
And the second because there seems to be little evidence that there is a global market for CEOs. As Deborah Hargreaves points out in The Guardian, recent figures compiled for the High Pay Commission show that only one company boss has been poached by a rival in the past five years. And he wasn’t even lured abroad: it was Marc Bolland and he moved from Morrisons to Marks & Spencer.
You may think this doesn’t matter, but it does. Most of us, one way or another, are shareholders in a FTSE 100 company (via our pension funds, for example). Every penny paid to them is a penny not paid to us in dividends. So in paying themselves vast, unjustified sums, they are taking from us just as clearly as the fund managers who grossly overcharge for managing our funds, the IFAs who nick huge up-front fees when we invest and the heads of publicly-owned banks who think they deserve praise for overpaying themselves slightly less than usual once a decade. No one should stop the bashing of senior bankers, but given all this it seems to me that investors would be wise to spend more time having a go at CEOs as well.