I‘ve been invited to comment on whether or not I think the Government should call the bluff of the RBS board who are, it seems, threatening to resign en-masse if they’re not allowed £1.5 billion worth of bonuses.
Funnily enough I think the Government should call their bluff. I don’t really care whether or not RBS staff, of whatever level, get bonuses. I’d say if they did everything expected of them then I can’t see why they wouldn’t be entitled to the same bonus they’d get if they remained in completely private ownership.
But the board resigning? Ah go on then. Why? Because they’ve been suckling on the teat of the state knowing full well what the consequences of that would be – Government stooges on the board and political interference. The promise that the Government wouldn’t interfere in the running of the banks it took over was always an utter fiction. It was always, always inevitable that this promise would be disregarded at the slightest hint of conflict between Bank and State.
Barclays, for example, knew this all too well. They went to extraordinary lengths to find alternative sources of funding – turns out they went to the Middle East. Their funding was more expensive than that offered by the Government, and because of that they hurried to pay it back. The result was that Barclays didn’t take taxpayers money, protected their shareholders and kept the Government’s mitts off their business.
RBS, on the other hand, took the money. They shafted their shareholders completely - and the taxpayer – and for the life of me I can’t quite work out why they haven’t all fallen on their swords long before now.
Do I approve of the political interference? Of course not. But as Lib Dem Blogger Tristan Mills once said, “People forget that in Atlas Shrugged most of the villains were businessmen.”
I want our money back, and if there’s £1.5 billion going spare there’s only one place it should be going.
John Scott said...
3 Dec 09 at 9:35 am
Although there’s evidently some political brinkmanship involved, there is no “ought” question here. It is a really very simple legal question. If directors are not permitted to act in what they consider to be the best interests of the company they have two options:
1 – resign;
2 – act contrary to the best interests of the company and pay damages for a breach of fiduciary duty if the company later sues them.
The difficulty is that if any other directors are appointed from within the banking world, they will almost certainly come to the same conclusions about the best interests of the company as the current board of RBS. Such new directors would therefore also be unable to act.
If the government pushes, and the board does resign, it therefore seems likely that the only viable directors will be from outside the banking sector. An entire board of inexperienced/under-informed directors is not a good thing for a company when it is need of massive change. So pushing the board to resign is actually likely to be counter-productive in seeing our money paid back.
We can object to the bank having taken state cash all we like, and crow over the fact that libertarians were proved right (once again) on this issue, but the position is somewhat more nuanced than most people realise.
Letters From A Tory said...
3 Dec 09 at 10:27 am
But surely the Government are to blame for taking over RBS without making sufficient demands on their bonus policies and pay structures? RBS were supposedly on their knees, yet Labour still failed to drive home the changes that RBS needed to make once it was controlled by the taxpayers.
Stinks of incompetence to me.
Andrew Duffin said...
3 Dec 09 at 10:34 am
Maybe I am being simplistic, but given the State owns the bank does that not make them the shareholders, therefore the directors are obliged to run the business as the shareholders wish? If that means no bonuses, then no bonuses it is.
As Charlotte says, they took the State’s shilling; now they have to live with the consequences. Tough. They’re lucky not to be begging on the streets frankly.
As one of the enforced benefactors (how many £10k’s does each taxpayer owe now?) I can only say the sympathy meter is stuck on zero.
David Matthewman said...
3 Dec 09 at 10:52 am
For what it’s worth Vince Cable seems to agree with you on this.
Charlotte Gore said...
3 Dec 09 at 11:09 am
Yeah that doesn’t surprise me. Problem is when he says it it makes me reconsider.
Laurence said...
3 Dec 09 at 1:37 pm
I’m with John Scott on this. The board has to act in the interest of all the shareholders and cannot simply do the state’s bidding.
A thirst for revenge, or spite, are not a good way to enhance shareholder value.
Charlotte Gore said...
3 Dec 09 at 1:43 pm
The best and only way the RBS board can protect their shareholders is to get out of Government control altogether, and if they can’t do that then resigning, surely, is better than capitulating?
Laurence said...
3 Dec 09 at 1:50 pm
“The best and only way the RBS board can protect their shareholders is to get out of Government control altogether”
That’s no longer an option for them, Charlotte.
“and if they can’t do that then resigning, surely, is better than capitulating?”
And then what does the successor board do? I think Mr Darling has waded off out of his depth (St Vince too, but he doesn’t have to suffer the consequences) and it is only a matter of time before he blinks.
Philip Hunt said...
3 Dec 09 at 3:27 pm
Better still, sack the fuckers.
Psi said...
4 Dec 09 at 11:33 am
Alternatively, the RBS Board could sell of the investment banking arm and any other profit making bits where bonuses need to be paid, that way those individuals could receive their bonuses. There should be a good price available as well, getting some of our money back from what was put in. The (currently loss making) remaining high street operations of RBS and Natwest could be run as retail banks.
The Labour party could screw these banks up even further and show us yet again how it is a terrible idea to allow government to interfere in what should be a private sector (in which I include mutuals) activity. The sooner people remember what a disaster nationalised industries the better.
Si Keighley said...
4 Dec 09 at 4:21 pm
Where I work, we haven’t had a Christmas Bonus for a few years now. Actually, that’s untrue, we’ve never had a Christmas bonus. Calling it a bonus, claim HR, would make it a part of our salary that we were entitled to, and the Christmas payment we used to get was a discretionary sweetener.
It seems that everyone assumes bankers “bonuses” are seen as being exactly like the extra money I got at Christmas, just a lump sum to keep them sweet. But, more probably, they form part of a performance related pay packets.
I’m sure there could be good grounds to be aggrieved at the level of remuneration some of these bankers get.
If I knew the sort of typical packages these people got rather than relying on the figure of them all lumped together, I may feel aggrieved. But all I get is a general sense that it’s “way too much”.
Leyton Jay said...
4 Dec 09 at 10:23 pm
If these banks are owned (for the most part) by the Government then we are all shareholders. We’re not going to be invited to a AGM sadly, but if we register our contempt with the government, we should get our say in the running of what are now, OUR banks.
What would you do with a politician, a contractor or an employee who refuses to do the things you’ve told them to do, over and over again? Sack them.
Lawyers and bankers are ten-a-penny and this lot have failed us. Just like in politics, there are dozens and dozens of successful people queuing up behind everyone of these fat cats. they’re probably foaming at the mouth with anticipation at the moment, and so they should be.
I think we could actually be better off with fresh blood and a close working relationship with the Treasury. I’d consider just sacking them, use our power as major (if not controlling) shareholders. But that’ll never happen.
Calling their bluff is the best I can realistically hope for.
Southie said...
6 Dec 09 at 11:19 pm
“What would you do with a politician, a contractor or an employee who refuses to do the things you’ve told them to do, over and over again? ”
A contractor you hit with a pipe. Sometimes, you gotta hurt people for their own good,
“But, more probably, they form part of a performance related pay packets.”
Plastic sheeting if they let you down would be better.
Southie