The Great Debate UK

Hypocrisy piled on humbug

The row over bankers‘ pay and honours has presented the depressing spectacle of British public life at its nadir, with hypocrisy piled on humbug.

On the one hand, we hear bankers and their apologists arguing that their rewards are required to keep them from running off to sunnier climes, which prompts a number of questions. First, when bankers claim that they have to be paid a fortune in recognition of the size of the organizations they run, we may well ask: how many banks of this scale are there in the world today? How many are so hungry for skills like those of Britain’s bank bosses that they are willing and able to offer these sorts of rewards?

Three or four, maybe, at most – after all, several of the world’s largest banks are now owned by the Chinese Government, so they are unlikely to want a British boss any time soon, and the others do actually have a full management complement anyway. By definition, the number of vacancies at this level is extremely limited, so the danger of an exodus of top British bankers is much exaggerated.

In any case, does it really matter?

After all, even before the crash, there was quite a lot of sniping at high City payoffs and we were told at the time that the outrageous salaries and bonuses were needed to secure the services of people like (Sir) Fred Goodwin et al – and since then we have had ample opportunity to assess the true value of their high-price expertise.

Is it really being suggested now that the banks collapsed because pre-crisis pay rates were insufficient to attract competent CEO’s?

Or is the argument that, if they had paid less astronomic salaries, the banks would have lost even more money than they actually did in 2008-9?

Are footballers really worth 12 times more than nurses?

-Rachel Mason is public relations manager at Fair Investment Company. The opinions expressed are her own.-

A recent survey revealed that the public believe footballers are the most valuable members of society. Now that is one of the most depressing things I have heard in a long time.

The ComRes survey, which was commissioned by the BBC, asked 1,000 members of the public what they thought 15 professions should get paid.

And although the public believe that footballers should get a lot less than they do – the average is £1.7 million and the public suggested £365,000 as an appropriate salary level – it is still a whopping 12 times more than those surveyed believe a nurse is worth (£29,000).

The public also believe that footballers are more valuable than the bosses of Britain’s top 100 companies. Currently, CEOs are paid £2.1million on average, but the public think they should get around £118,000 a year – less than half of the salary deemed fitting for kicking a ball around.

I’m sorry, but what is going on here? I would give anything to play sport for a living – it is literally a dream job – and then to get paid ludicrous sums of money to do so is just unbelievably lucky, but these footballers don’t even seem to appreciate what they’ve got. As a society we moan about them all the time – their attitudes, their questionable morals, the way they flaunt their hideously extravagant lifestyles – but apparently, we still think they should get paid more than any other profession! Crazy!

from Funds Hub:

Unstable, greedy, selfish….

Not the words ringing in my ears as I leave for work every morning, but City of London Investment CEO Barry Olliff's take on the UK financial sector.

Olliff is taking his company from AIM and onto the main market next month and the new governance guidelines which will apply to the firm as a result have sparked a frank assessment. Take it away, Barry:

"From my experience of the City, when I consider remuneration and remuneration packages, I'm taken in the direction of instability, greed and selfishness..."

"...the City is made up of many selfish people who are encouraged by management, and management's approach to remuneration, to develop egotistical tendencies.  This culture of greed, in my opinion, manifests itself often via a lack of risk awareness, poor team spirit and significant key man risk..."

"...we are not looking for freedom fighters.  Rather we would say it is better to appoint decent people, who can genuinely work in a team environment, than appoint just no1's.  We often say, better to appoint a good no2 who is a decent person than a no1 who is greedy, political and does not consider the maintenance and development of the brand..."

Oof... and there's more. Olliff is clearly not convinced by the fashion for deferred bonuses, designed in theory to protect clients from short-termist bankers and asset managers.

"Is this really the way to go?  Why not pay someone on time for their work.  Or, is this meant to delay their departure, a sort of enforced loyalty?  Or is it that there is insecurity regarding the profits that the individual has created?  If this is so then surely the focus should be on the quantum, measurement and the quality of the corporation's earnings."

from The Great Debate:

How the bailout feeds bloated banker pay

-- James Saft is a Reuters columnist. The opinions expressed are his own --

Rising pay in the finance sector in the wake of the global financial crisis is no surprise and is driven partly by the government's bailout itself and the underwriting of banks that are too big to fail.

News that some financial firms benefitting from government largesse actually increased the share of revenue they pay their employees sparked a lot of outrage but more heat than light.

The good news is this new bulge in pay may not be sustainable.

The bad news is it will probably only be stopped by further regulation, regulation which may never come.

To understand what is going on you need to understand the economic concept of "rents", essentially the extra money a given individual or industry is able to extract from its clients above what it would be able to if there was perfect competition.

A monopoly will charge a very high price for goods or services because, well, they can. Needless to say economic rents are not a good thing, unless of course you are in receipt of them.