Industry | 2010.02.28
Bankers' pay: Winning the battle, losing the war
The chief executive of HSBC is expected to take a big hit on his pay today but other traders will still take home billions
If reports are to be believed, something will happen today that is both extraordinary and yet profoundly unsatisfactory. Michael Geoghegan, the chief executive of HSBC, is expected to take a big hit on his pay this morning, either by missing out on a whopping rise in his £1.1m basic salary or by passing on a cash bonus worth anything up to £4m.
Either outcome would be astonishing. After all, Mr Geoghegan could argue that he deserves a bit of extra cash for steering his institution through the worst financial crisis in decades without having to take money from the taxpayer (although HSBC has certainly benefited from the safety net the government has put under the entire banking sector). But instead, he is going to crack under public anger over the huge amounts senior bankers have been paying themselves. And he will not be alone: over the last few weeks, like so many tenpins, the bosses of the UK\'s other mega-banks, RBS, Lloyds and Barclays, have all caved into public opinion and waived their bonuses. This marks a big shift.
Ever since the credit crisis began, nearly three years ago, the bosses of the banks have largely refused to give up any of their performance-related rewards – however disastrous their performance. Think of Fred Goodwin, the man who smashed RBS into the rocks, but who still fought bitterly to keep his pension of £700,000 a year. Nor have the masters of the universe faced much resistance from the government. In a newspaper interview at the start of last year, City minister Paul Myners blasted investment banking\'s bonus culture – and was promptly slapped down from above for his troubles. Even after funnelling billions into the banking sector, senior Labour ministers still lacked the nerve to object to the performance-distorting sums bankers were paying themselves. That may have changed over the last few months, with such measures as a tax on bonuses, but the fact remains that the capitulation of the bank bosses was due to public opinion and the press, not politicians. The most powerful men in the banking industry realised that they could not explain away another big handout.
Whether you think outsize pay in the banking sector is harmful to social cohesion or to the economy, today marks another small victory. But the emphasis is on small. Public shaming is a powerful force but it is usually temporary and rarely forensic. For every million-pound bonus Stephen Hester waives, his traders at RBS still take home £1.3bn. John Varley may forgo this year\'s windfall, but that leaves the Barclays chief in a stronger position to lobby ministers over financial regulation. These small erosions of banker power will never be turned into a lasting settlement without government action.
For more information, please visit
http://www.guardian.co.uk/commentisfree/[...]bc-chief-executive-pay-bonuses
