Bankers must have heaved a glutinous sigh of relief when the MPs' expenses row came along and took the spotlight off them. But, swings and roundabouts, as soon as the MPs get their heftily holed ship just about on an even keel again, bankers go and put themselves back in the spotlight. And it doesn't look as if they've changed a bit.
It looks to me as if noses are still well in troughs, and the troughs are still gargantuan. RBS will be paying Stephen Hester close to £10 million if he gets things right. Getting it right will involve upping the share price and keeping it there for a while, so that the government can recoup some of their investment on behalf of the taxpayer.
After a bit of thinking, I've decided I'm not against huge sums of money being paid to people providing they earn it. Will Stephen Hester earn his? There are some interesting questions about that. I'm afraid I'm not persuaded by the argument that the board, led by Sir Philip Hampton, are paying a truly exceptional sum for a truly exceptional talent. They might be for all I know, but that argument has been discredited by being used too often of the mediocre talents, like Fred Goodwin, that got us into this situation in the first place. I have no way of knowing if Hester is a truly exceptional talent.
The exceptional talent argument is also suspect in its basis. Does an institution as massive as RBS really rely so heavily on the talent or otherwise of one person in one position? Does it not also rely on the talent and commitment of thousands of others, right down to cashier level - you know, the ones who, occasionally at least, actually meet the customers? Should they not also be rewarded commensurately?
But, OK, for the moment, let us accept that one man will make so much difference that it is worth trolling out £10m for him. Even so some questions still spring to mind. The answers to the questions I still have may be available, but I haven't been able to find them. There seems to be a lot that we still don't know about exactly how things are going to work.
The package is £1.2m in salary, £2m in annual non-cash bonus payment (what can you get that's non-cash and is worth £2m?), and up to £6.4m in bonuses if he achieves certain objectives, which appear to be nearly all, if not all, reaching certain share price thresholds. The share and stock options will be made in the 2009 pay package but can only be redeemed in three years' time. Also the bank retains the right to claw back the incentives if they don't believe that the share price has been raised by sensible decisions.
Now in essence, that seems like the beginnings of a sensible scheme. There is actually a series of tangible targets, rather than the directors just signing on the bottom line of a silly deal that gave the CEO squillions of pounds of the shareholders money regardless of success or failure. And the targets are for the future, not for now, so decisions have to be made that will have long term effect. And finally, there is a get out clause for the directors, that enables them not to pay if the decision making process that leads to the targets being met is seen not to be sensible.
But to my mind there is one big weakness and one big absence in what has been reported so far. The weakness is that the system is still in place where the corporate directors all fill each other's pockets in one big merry go round. What will happen if we get to three years' time and the share price has got to 70p, but it is obvious that it has been got there through a process that has done the bank no long term good? The discretion lies with the directors as to whether to withdraw the bonuses. Will they? Or will they allow them knowing that not to do so, to show some backbone about it, would put them out of kilter with all their friends on the corporate gravy train. Will those directors be kind to Stephen Hester because they know that if they are not, corporate doors will suddenly start closing on them all over the UK, and their gravy train lifestyle is suddenly put in jeopardy? The system, the elitism of the inner core has not changed, has not even been dented. I doubt if they will have any wish or any motive to rock the boat.
And the missing bit is any word about what will happen if he fails. If the share price still bumps along at about 35p, if lending does not pick up, if new business does not come in, he will still have been paid over £1m for a year's non-success. What happens if the share price drops? What happens if the unthinkable comes to pass and the directors decide he needs to go? Will they sack him, or will they let him resign? How many months salary in lieu of notice will he walk away with? It ought to be none - on a salary of £100,000 a month, he ought to be able to put a bit aside. But I'll bet that in the details we haven't been told yet there will be a nice comfy parachute. Not as gross as Goodwin's, even RBS don't have the face to do that again. But will there still be a pension for him? There is no word on that, yet, and I do not think that is a good sign.