Liberal Burblings

First of all, let’s get the facts straight. Stephen Hester has not been awarded a cash bonus.

He has been awarded share options. These do not vest until March 2013 and March 2014 (50% for each date).

So, OK, presumably that is where the eyes of 90% of the population glaze over and they change channels. Here’s a definition of vesting:

When employees are given stock options or restricted stock, they often do not gain control over the stock or options for a period of time. This period is known as the vesting period and is usually 3 to 5 years. During the vesting period the employee cannot sell or transfer the stock or options.

So, (a) he can’t cash the shares in until 2013 and 2014. And (b) because they are shares, the value may go up or down during that period.

As a result of those conditions, Stephen Hester is, to an extent, locked into the fortunes of RBS. He has an interest in ensuring he does all he can to increase the value of RBS shares. So that’s an incentive for him to improve the performance of the bank.

I can readily accept that Hester has done a good job. He has, farnkly, stopped RBS going down the toilet.

The level of banking bonuses and salaries is obscene and morally reprehensible. But to start with a hairshirt approach (and yes I know he gets a £1million salary anyway but that is similar to others in a similar position) to just one bank leader is daft. It would result in a worse performance of RBS for the taxpayer. It would be cutting our nose to spite our face.

Reform, or reduction, of banking bonuses and salaries needs to be done across the world. It can’t be done in isolation in one bank.

Here’s the FT quoting the reaction of Boris Johnson:

RBS should be run “on public sector lines”, he added

Public sector lines? Absolute, unmitigated round sperical objects rolled in unlimited horse manure. If it is run on public sector lines it will end up being unsuccessful in the competitive world of banking. That would be a disaster for the taxpayer.

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