Boris has boasted that he stuck up for bankers more than anyone – blog by HPC Head of Policy and Research, Ashley Walsh, for Left Foot Forward.
The bankers are revolting. Again.
Standard Chartered has just hit the headlines after its CEO, Bill Winters, called his investors ‘immature and unhelpful’ when 36% of them opposed his £5.95m pay package at the company’s annual general meeting.
I could write an entire article accusing Winters of being a City snowflake – but it’s best to focus on the systemic issues.
Executive pay in the UK is high in comparison with other developed economies – with the exception of the USA. The 2013 Business Act requires listed firms to subject their executive pay to non-binding annual shareholder votes and, at least every three years, to put their remuneration policies to binding votes.
As our research at the High Pay Centre shows, shareholder pressure has been limited at best. The suggestion that shareholders who express discomfort over provocative top pay are immature and unhelpful is laughable. It is their job to hold a company to account.
Are business leaders so unused to shareholder pressure that they throw their toys out of their pram when a minority dare to question them?
As Martin Wheatley, former head of the Financial Conduct Authority, replied to Winters: ‘It is the bankers who are immature’. Wheatley added: “Shareholders are trying to make a broader point: bankers are taking too much of the bank’s returns in pay.”
The example of Winters highlights the much bigger problem: despite post-crisis anger at the City’s excesses, the bankers haven’t changed one bit.
While it’s true that, as banks’ profitability collapsed after the crisis, pay dropped back a bit. Plus EU rules prevent bankers’ bonuses from exceeding twice the level of basic pay. But in the long-run, pay is higher now than it was then. In 2010, the average pay award for the CEOs of the five largest UK banks was £4.8m. This year, that figure rose to £5.2m.
Worse, Credit Suisse is currently taking HMRC to court to recoup £239m paid over the course of just four months in 2010 as a result of Alistair Darling’s bankers’ bonus tax. The tax was introduced to maintain funding for vital public services after revenues from the financial services sector collapsed as a result of bankers’ reckless behaviour.
It’s not just that bankers have a tin ear, although so many of them obviously do. It’s that they lack any basic sense of ethics or proportionality.
The arrival of Boris Johnson into Downing Street this week will only make them worse than ever.
Johnson is currently bowing and scraping to some of the FTSE 100’s most powerful CEOs to make up for saying ‘f**k business’ – as some firms raised perfectly legitimate questions about his Brexit policy.
Last month, Johnson sought to make amends by bragging:
‘I can’t think of any other politician, even Conservative politician, who from the crash of 2008 onwards actually stuck up for the bankers. Can you think of anybody who stuck up for the bankers as much as I did? I defended them day in, day out, from those who frankly wanted to hang them from the nearest lamppost.’
Although we at the High Pay Centre do not support hanging anybody from lampposts, near or far, we are concerned that bankers’ pay is related neither to their performance or to the return that they produce for society.
While Johnson is busy going on about the last days of Rome, the bankers are trying to relive them.
Their actions are bringing the UK’s current version of capitalism under extreme pressure. If the banks don’t get their houses in order and fast, they will continue to risk pushing voters in precisely the opposite direction.
Ashley Walsh is Head of Policy and Research at the High Pay Centre.
This blog post originally appeared on Left Foot Forward.