Those rescuing our banks deserve our respect, not our anger.
Bankers -- they're scum-sucking molluscs, every last one of them, eh? Well, you could be forgiven for thinking that if you read the scathing attacks on them in the media every day.
But if we really want to get our banking industry back on track as soon as possible, we need to stop treating all bankers as pariahs and start seeing them as the honest professionals that most of them are. And, more importantly, we need to start showing a bit more respect to the new bosses who have been coming in to help us lift our sullied banks out of the mud.
The anger that greeted the massive goodbye payout handed to (ex-Sir) Fred Goodwin was certainly justified, and his demotion back to the ranks of the commoners was quite right. He presided over a disastrous period at Royal Bank of Scotland (LSE: RBS), whose fast rise and faster collapse was brought about by incompetent management at board level.
The RBS affair showed us all that was wrong with banking.
Bonus clawback
And only this week we've heard of Lloyds Banking (LSE: LLOY) using its 'clawback' power to slash some executive bonuses after the payment protection insurance miss-selling scandal required it to set aside a massive £3.2bn for compensation claims.
It's the first time a clawback option has been exercised by a UK bank, and it has to be a good thing. If used properly, these clawbacks could help keep pay more in line with longer-term performance, and make it clear that bonus-boosting activity aimed solely at this year's targets will not be rewarded if it leads to longer-term trouble.
But we need to draw a clear distinction between past bosses who performed poorly and lost money for shareholders, and the newcomers trying to clear up the mess the old guard left behind. If we want to secure the stables, it's no good criticising the new stableboys for the horses that escaped before they arrived.
Enter the rescuers
New Lloyds boss Antonio Horta-Osorio, tasked with the onerous recovery of the bank's fortunes, disqualified himself from any bonus payments after taking time off due to a stress-related illness (brought on by the job itself). I thought that bonus decision was an honourable move and the right thing to do, and that if not fullsome praise, then at least some respect was due to him. But to a lot of people, he was just another greedy banker who shouldn't have been in line for a bonus anyway.
I have sympathy, too, for Stephen Hester, RBS's current chief, after political and public pressure pretty much forced the slashing of his bonus this year. What made it worse is that he was, yet again, portrayed as a fat cat taking the cream while taxpayers are footing the bill.
But Mr Hester wasn't the one who brought the bank to its knees. Instead, he's played a key role in reviving RBS to earn an estimated £4bn pre-tax profit this year. And if he's driven away -- he said he felt close to resigning -- RBS shareholders (i.e. mostly us taxpayers) are going to lose a lot more than the value of his bonus.
Top pay out of control
There is a valid call for top executive pay to be brought properly into line with company performance, and not let it keep climbing upwards, way out of step in percentage terms with the pay of ordinary workers, as my fellow Fool Prabhat Sakya recently wrote.
As he pointed out, the average pay for FTSE 100 chief executives has risen to around £4m a year, and although some are paid relatively modestly, the top earners are on stratospheric pay packages. It's rumoured that Bob Diamond, the boss at Barclays (LSE: BARC), is on for bonuses worth £10m for 2011!
Compared to that, Stephen Hester's slashed-bonus reward for turning a record £25bn loss at RBS into a £4bn profit in just three years seems modest.
Perspective
So yes, let's rail against the excessive levels that top directors' pay packets have reached, and campaign for fairer, performance-related, bonus schemes. But let's stop tarring our banks' rescuers with the same brush as those who brought about their undoing in the first place.
What we need for our two bailed-out banks now is the best management we can get, and I think that's pretty much what we have. But if we continue to besmirch the name of all banking executives simply because they are bankers, we will end up with the banking management that we deserve, and we'll be the poorer for it.
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