Gary's News and views

Gary writes a weekly article which appears in the Plympton Plymstock and Ivybridge News in South West Devon. The articles are published here.

 

Thursday 2 February 2012

BANKERS' BONUS BOMB!

One of the advantages of being an MP is that we get to feel the heat that certain decisions generate: by post, by e-mail, by conversation, by vibration as I walk down the street.

And nothing gets your backs up like bankers' bonuses. I completely share the anger at the kinds of figures being bandied around for senior bankers who have presided over a system of irresponsible lending that triggered the credit crunch in 2007/8. People should not be rewarded for failure and the actual figures have got way out of control.

The prospect of Stephen Hester's £1 million bonus caused major shock waves last weekend and if he had not agreed to waive it, I suspect the inbox would have been full to overflowing by now. Why can't government stamp out this kind of practice? How is this allowed to happen in a business of which we all own 83%?

RBS is in a mess, but it is in our interests that it trades its way out of loss-making and back into profit and strengthens its balance sheet and share price so that we get our money back and make a substantial profit as well to help keep taxes down.  Not many people could do this successfully. This is a vast organisation with a balance sheet larger than the turnover of the UK. If Hester does a good job over the next few years we could all benefit to the tune of billions. For that he should surely be incentivised and rewarded, at the right time.

If Hester turns RBS around and we make a profit of billions I don't care if he is well rewarded. The key issue for me is when? It must surely be at the end of the job when the bank has been sold back into the market and we have made our profit, not at the moment when the job is less than half done and the bank is still struggling.

I do not want the government to run the bank, as historically the state does not do this well. But as major shareholder we should have made sure the profit arrangement for the CEO was better linked to the end value of RBS. Owning banks is a relatively new experience and we have taken too long to adjust and get the balance right between pressure and intervention.

It is time to now get this right, before you all explode.

posted by Gary @ 09:41