Demagoguery

I was going to write this about Stephen Hester. Actually, there's not much to say because literally everyone on left and right I have spoken to thinks we should pay the bonus to get / keep the right man. £2m is a lot of money, but it's broadly lower than comparable CEO pay. The average pay of the CEOs of the top ten of the FTSE 100 is about £3.5m. RBS isn't one of the top ten (it's lower down) but the size and complexity of the task I think makes them the right comparator. In banking we know rewards are high (the head of HSBC had £5m for 2010). Given that, if you want someone to do the work, they you pay them the rate. You may not like it and wish they would do it for the public good, but they won't - they're bankers. Not spending the money is stupid and wasteful and the £900m share price fall is the obvious consequence (outlined well here). This is posturing with a hefty price.

There have been a few red herrings in the debate. Firstly, there's been a bit of bleating about the share price performance (i.e. Mr Hester has presided over a fall in value). But we know explicit share price links are dubious because it is so hugely affected by environmental factors (i.e. everyone gets a fortune in a boom), so why are we revisiting this now? Secondly, it's been compared to the public sector settlements. Again, this is nonsense. RBS is not a public service, we happen to own it because of a crisis. We don't want to own banks, we want to sell it. We really don't want civil servant to run; we need it to act like a (successful)  company and make some money. If this is the best counter-argument to the bonus, I despair; even more so now it seems to have worked.

There is, by the way, a real issue here. But it's hard and complex. And that's the prominence of the financial industry in high reward jobs. Over the weekend, I read Momigliano on the decline of the Roman Empire, where he espoused the now unfashionable view that the conversion of the Empire hastened its downfall, thusly:

The Church attracted the most creative minds ... attracted many men who in the past would have become excellent generals, governors of provinces, advisers to the emperors.

I think Momigliano simplifies about Rome, but the point is valid for financial services today. The vast rewards made in banking must suck the most brilliant minds of the modern world into finance. Forget CEOs, it's thousands of people right across the banking industry who earn vast amounts in a away that no other career can offer. There are good reasons for this in part (very competitive, high stress, high workload etc), and hard realities to unpick, but I'm pretty sure it's not desirable.

It's important to be specific here: I'm not saying our best minds shouldn't make a fortune (though I am open to the argument that high levels of inequality carries social cost), but rather that I would like our best minds not to all be bankers. This is a tough emotional call, because it means those of us who are not bankers have to accept we have been working in less competitive industries, but that's what it means, and that's what we need to unpick. I have no idea how to do that, but I think someone should. That would be a good issue for our political class to address.

What they shouldn't do is strip Sir Fred Goodwin of his K. He has no committed a crime: he simply took (some quite stupid) risks that did not come off. He is also, by all accounts, a horrible man. These are not reasons to take away an honour. Honours are awarded for what you did; they are not conditional on future conduct - criminals sit in the Lords, a thousand misdemeanours have been committed by recipients of honours in every country.  This is spiteful where we should be measured, inconsistent where government should be above such things and simplistic when the issues are complex. And it is shameful. Like the outcry over Stephen Hester's bonus, the incident is a sideshow, but these issues are real. Aristotle warned of the slide into mob rule that accompanies democracy. This will doubtless be popular, but it is demagoguery of the most blatant kind, and those who practise it deserve out contempt.