Saturday, 28 January 2012

Economics for Dummies - Lesson 2

And so to Hester-gate, aka ‘21st century class war’ or ‘the next ride on the blame shift merry-go-round demonising bankers so that politicians can get away scot free’.

Let’s get straight to the facts:

Arguably one of the most important jobs, if not THE most important of jobs in the UK right now, is to get our damaged and recently part-nationalised banks back on their feet so that we taxpayers can get our money back. With interest. As soon as is practicable.

The last Government brought in Stephen Hester, apparently the best man for the job. He has been endorsed as such by the new Coalition Government as well.

He is acclaimed by everyone to be doing a good job, apart from assorted meanies on the Left who want to throw stones at him because he is a banker and rich. (They’d love to be able to denigrate him as an ex-public school boy too but sadly for them he went to a comprehensive before going up to Oxford. He is also a white Anglo Saxon protestant. If he was very ethnic, the Guardianistas would be less hopping mad but the Daily Mail would be more so).

So far, so good. He’s doing a good job, earning big money but substantially less than he could earn elsewhere in the private sector, accepting this no doubt partly because his current role is one of THE jobs of the moment and thus is a challenge and will be good for his CV, maybe partly out of altruism and probably because he will likely pick up a knighthood at the end of it, assuming he is successful. And assuming he is, the non-executive director roles will come flowing in for years to come.

So, the big three questions of the day:

Q1. Should he have such large potential remuneration in the first place?

Simply, we need the best turnaround expert for this task. And that will cost. Inevitably. Supply and demand and all that - something our Lefty luvvies often try and pretend does not exist when it does not suit their ideology.

Now he wasn’t bumbling along running some dull Government department or quango, earning around £100-200k. No, he was the acclaimed CEO of British Land, one of the top 3 property companies in the UK, one that is well run, cautious and has survived numerous booms and busts very comfortably since 1856. This boy had been earning millions for years being a high flyer at Credit Suisse and Abbey National before British Land.

When you are in intensive care, you don’t say: ‘Take away this acclaimed medical expert who is doing a brilliant job and seems to be saving my life, he is paid far too much. Bring me a more sensibly remunerated doctor.’ On the contrary, you say: ‘Can I get this wizard to make me better any quicker and would it help if I motivated him more by paying him more?’

Unless you are a Lefty, when you make cheap political points about how much he earns, how much more that is than a senior civil servant – good comparison, Chuka, really? – and how much this is in relation to a corporal in the British Army in Afghanistan – and you Peter? All of which, of course, is bollocks.

Supply and demand.


Q2. Should he get his bonus?

He should get whatever bonus the RBS’ remuneration committee feels he deserves for his last year’s performance under his contract. Populist bullshit from Lefty politicians, journalists and all the rest is just that. Bullshit.

I, as a taxpayer, want his mind 100% on the job getting my money back not on endless meetings with his chairman, UKFI, Government ministers, his comms team and others about various Lefties views on his bonus.

Q3. Should he take it?

If I was him, after all this bollocks, I’d refuse it and resign. My resignation letter would say:

‘We agreed my remuneration in my contract. Nowhere does it say the Polly Toynbee set gets a vote on what my bonus should be. I have been working night and day to turn this fucked up company around with considerable success and acclaim and all I get is bullshit from people who know nothing about what I am doing, could not understand it if I explained it to them and want to use me as a class war political football. To say I am demotivated would be a fucking understatement. I’m out.’

He would be in a higher paid job by Easter.

PS Loving the paradox of unions which endlessly use every aspect of employment law to defend their often idle and incompetent members whilst seeing no hypocrisy in demanding that a manager’s contract should be completely ignored.

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