Dec 03 2009
Let the Board of RBS resign
The government was right to challenge the idea that the top people at RBS should receive cash bonuses for the current performance of the bank. The Board has retaliated by saying it will resign if the government presses the issue. It would be a joyous day for taxpayers, if the government graciously accepts their offer.
The Board of RBS is overpaid and underperforming. There are 8 NEDs, 3 executive Directors and a Chairman. It would be quite easy to find a new smaller Board who would do the job for less than half the current aggregate remuneration. Such a Board should be charged with the task of returning cash and value for taxpayers as quickly as possible, by splitting the bank ,cutting its costs and selling off different businesses and assets. Cuts in costs should start at Board level, to show the rest of the business what has to be done. RBS is spending too much on expensive people, too much on property, and too much on other business costs. It is a loss making bank that needs to work its way through its past mistakes more rapidly, and account for the past losses in full as soon as possible.
I fear the government is just posturing for the headlines, and will back off when faced with the resignation threat. If only they would accept their resignations, they could then begin to sort out this loss making disaster in a sensible strategic way, which has twice accepted huge sums of money from taxpayers. The last thing taxpayers want to see is their hard earned money paid out in large bonuses to highly paid people at a loss making bank.
In the private sector it might make sense for shareholders to subsidise high pay and bonuses to a select few who might get the losses down. That is their call with their money. In the public sector it is quite wrong to pay high bonuses out of taxpayer subsidy, when much lower paid people are forced to foot the bill, and when taxpayers will pay the bill if they fail.
37 Responses to “Let the Board of RBS resign”
John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College...
Let ‘em go. Talent such as that found in the RBS boardroom is something the tax-payer can well do without.
Can they be sued for negligence, too? Wouldn’t want them to misunderstand exactly what we think about their “skills”.
I’m surprised the MSM haven’t yet linked this story to that of Stephen Hester the Chief Executive of RBS being paid £7M, and only being appointed a few months ago. It looks like complete hypocrisy on the part of the government.
Your coments seem very sensible.
RBS is in effect a failed business, which would not still be in business, without taxpayer support.
All employment contracts should have been made null and void as a condition of taxpayer subsidy, and new and more sensible ones negotiated/offered as part of any continuing employment agreement.
I’ll do it. When they resign, I’ll do it. Just let me at (them-ed).
On Newsnight yesterday, Sen. McCane, who ran for President, said that President Obama had hesitated over the War in Afghanistan because he had no combat experience.
The same is also true of Mr Brown (and his team) and the banks.
Here are some questions:
1. How much is the RBS involved in Dubai? This may be small beer to newsreaders, but we are talking about some £50 billion which, even if it is the total amount, is huge by British government standards. (More than we are spending in Afghanistan, for example).
2. How much toxic debt is out there in RBS? Why has it been neatly brushed under the carpet? Is it because it is unmanageable?
3. Does Mr Brown realise that we are a medium size country with world size banks? (Who said that?) So how can we “guarantee” them?
This rubbish about how much bankers are paid is a red herring.
And who runs these banks is a red herring.
no business can survive with micro management from politicians totally unqualified in that business area, this is no different
RBS needs to compete in the market for staff, if all the best staff leave and go to the competitors then there will be little value in the publics shareholding
many of the junior staff will have been successful in their roles, in profitable subsets of the business, there is no reason they should not be rewarded
you need to be careful we do not run it like tractor production in Maos China
Best answer is to get it out of public ownership asap, encourage but do not compel them to give staff bonuses in RBS shares which cannot be cashed for 10 years or more
Mark Reply:
December 3rd, 2009 at 11:02 am
We have discussed this issue before. In the present environment, banks should be making large amounts of money because markets are rigged in their favour to permit them to recapitalise to offset the losses they made previously, mostly unacknowledged in their balance sheets. It is not right to pay bonuses when you have the market tilted so much in your favour – no competition, huge interest rate margins etc.
alan jutson Reply:
December 3rd, 2009 at 11:20 am
Mark
Agreed its like a Cartel at the moment.
In any other industry the members of a cartel would be taken to Court and fined.
Lola Reply:
December 3rd, 2009 at 1:26 pm
It’s been a cartel for years. It’s just more obvious now, as well as becoming a state supported one. Lefties always wanted control of banking and now we can see the endgame of that ambition. Fat pay for the state banking bureaucrats.
Yes, yes, yes. Precisely correct. 99.9% of the public would be with them. So long as Lord Such-and-such, or Baroness The-other aren’t appointed in their place. There are SO MANY talented folk out here who would do these jobs 10 times as well for one-tenth the salary!
And by the way, I remember hearing that these people would also receive share-price related bonuses. Can we recoup losses related to share price falls from these people please? And maybe add those terms to the Contracts for those on the Lloyds Board? Thank you
This is just headline grabbing by the government who continue to focus on the “big, bad bankers” to distract the British public from the continuing saga of MP expenses.
They want us to forget that we employ & pay MPs 100%
This is an investment bank which failed – which was the more outrageous in that it was depositors money which they gambled and lost.
So they have no right to be in the investment banking business – and frankly no right to be in the commercial banking business either. Let them resign.
Written as a confirmed and outraged capitalist and free-marketeer.
Was talking about this over coffee at work today, general consesus here is as per your analysis. Like you we also thought that the government would talk tough for the headlines but in the end come up with some wheeze so that the bankers could collect their bonuses (although under a different name, maybe related to paying back some money to the taxpayer so it looks like good news) and the government could also save face.
Must be great to be a banker in the nationalised banks – make a profit for your bank and you collect a nice bonus, make a loss and the government steps in to cover it. Trebles all round!
Yes indeed.
In an echo of yesteryear, or 1977 to be precise, I read with interest that British Leyland, reduced it’s board from 13 to 7 members. No reason another failing company gulping down taxpayers money shouldn’t be equally culled.
Nobody is indispensable, and these jokers are try to prove they are. Sack them to set an example and see who then employs their unique talents. A clear case of the wagon trying to lead the horse going on here In any other industry these workers would have been sacked for incompetence a long time ago. Political gold for any politician holding their heads on a plate.
Simon Reply:
December 3rd, 2009 at 2:01 pm
If the board are sacked then they will be making claims for constructive dismissal and the tax payer will foot the bill .
It probably hasn’t occurred to such arrogant people that if they will forfeit severance money if they resign .
The real issue is whether the board are right or not that paying a big bonus to retain key staff is in the interest of the shareholders and it probably is .
Labour culture is reward for failure: prizes for all who don’t deserve them. I wonder if any of the board would still be in pylace absent tnhe bailout. The only value in keeping any of them in any role is to help identify where the bodies are buried so that there are no more surprises like Dubai.
Out of curiousity, why are there still 8 NED’s on the board? Surely they are there to oversee matters on behalf of the shareholders. Given that RBS had to be rescued, and is now 70%, going up to 84% owned by the State, there are hardly any of those left. Couldn’t they simply be reduced to 1 on behalf of the remaining 16% with the Chancellor and the Chairman of UKFI holding NEDs (unpaid and ex officio) to observe the interests of the taxpayer?
Just seems a smarter and cheaper way to run it to me…
One of the problems with government work is that people become essentially unsackable because there isn’t the goad of comp-etition & it is easierto do nothing. The RBS bosses are learning.
JR: “It would be quite easy to find a new smaller Board who would do the job …”
Carefull, speak too loudly about any potential vacancies and ..
the Secretary of state for business enterprise regulatory reform, The right honorable baron Mandleson of boy in the county of herefordshire and Hartlepool in the county of Durham, First secretary of State, secretary of state for business innovation and skills Lord president of the council and honorary freeman of the bourough of Hartlepool,
might swoop down and snap them up.
A man can’t have too many titles in these egalitarian times.
Far better for politicians to butt out altogether and make it their target to split the bank up and get rid of it fast.
Leave business to the free market and let the politicians devote their time to implementing directives sent from Brussels.
Unfortunately, John, I don’t give much hope to your sensible suggestion. I notice lord Myners has given what the BBC called a ferocious attack on bankers’ bonuses, which has all the hallmarks of a verbal smokescreen to disguise a fudged capitulation by this government.
The FT reported this morning that RBS was the worst exposed of the UK banks to the Dubai crisis. It never seems to get any better, does it.
The biggest robbery in British history. Never has so much money been stolen for such a small number of people. We are talking tens of billions.
If people really understood what has gone on, there would be blood in the streets.
I don’t agree. The board of RBS are right to say they must serve all shareholders, not just one. They run an investment bank and must do what they judge best to make it competitive. But we don’t want public money of £1.5bn or so going on bonuses. What’s the conclusion? The UK government should not own a bank. The circle can’t be squared.
Brian Tomkinson Reply:
December 3rd, 2009 at 8:35 pm
Richard,
I agree that the UK government should not own a bank but it does, and on our behalf. Therefore, as by far the majority shareholder it has a duty to taxpayers to instruct the board on this issue of bonuses. In my view, those who should be grateful not to have lost their jobs and much of their pensions after destroying their business, don’t deserve any bonus.
Richard Reply:
December 4th, 2009 at 8:33 am
I think JR has the right approach – break it up as soon as possible with the ovre-riding priority being reduction of risk to the taxpayer. Talk of building shareholder value is a red herring – there is no hope of recovering the equity
In any business when shed loads of money have been lost the last thing anybody expects is fancy bonuses and pay rises.
Of course now RBS is public sector ….
Its time that public sector pay was linked to the tax take.
Let the board resign but they won’t need to. Labour won’t stop the bankers’ bonuses – they just put out sound bites to give that impression. These bankers ruined their businesses and should have lost their jobs and the majority of their pensions as happens with most other failed businesses, but they will be paid millions, endorsed by a government representing the majority shareholder viz. the taxpayers.
The justification for paying bonuses at RBS on the news tonight was that it was necessary to retain good staff to have any hope of re-paying the taxpayer for the bailouts. Bloody cheek! The £1.5 billion set aside for their bonuses should be an immediate part repayment to the taxpayer. These bankers still believe they can privatise the profits but socialise the losses. So the board have threatened to resign. Can we have that in writing?
Shame on you John to get sucked into this sideshow.
The board of RBS are courageous in standing up to the government. History tells us that the reason that nationalised businesses fail is because of political meddling.
The fact of the matter is the job of a government is to govern and they should not have anything to do with speculating in shares.
Liquidity is a public good and providing it to banks at a time of a financial tsunami is in the public interest.
The moral hazard argument is settled by charging a higher rate of interest for monies loaned. The idea that shareholders must be wiped out so that the state makes a profit to ensure moral hazard is evil and immoral.
Reply: This should not be a nationalised company. They should be made to face reality and be returned in bits to the private sector as soon as possible.
I’ve said it before and I’ll say it again, it’s becoming more and more like a 419 scam. Every time Brown and his government give them a load of money to ’save the world’ with they just come back for more and more.
Enough is enough (any chance you can persuade DC to revisit that phrase?) bad debt has to be written off.
The Board should not be allowed to resign. They should be sacked for their obvious incompetence.
However, the problem is that any Board appointed by this government would be a bunch of Brown’s ‘yes’ men.
RBS needs to be broken up and sold off to get as much of this substantially understated set of liabilities off the public balance sheet ASAP.
Unfortunately the only thing occupying Brown’s mind is the next election so whatever solution he offers it will be the wrong one.
Quite. The propoganda of the RBS board is that “people of talent” in their investment department must be rewarded for success. However, any fool can make money during a bull market, when the FTSE is rising.
The test will come when the bear market resumes, as it probably will. Has the board of RBS drawn up a scheme of negative bonuses should its investment arm lose money? Perhaps I should write to the CEO of RBS and ask him.
The CEO of RBS wants 5 years to return the bank to profitability. When we take office, we should tell that he has 18 months or he is out on his ear. If we must bear the pain of being the majority shareholder, we want to experience the pleasure too.
All your comments have made interesting reading but just that.
It does not matter how much the bankers are paid, it does not matter how big the bonuses are, it does not matter that the government are still afraid of the banks because the government are amongst the big wage earners and receive big bonuses sorry my mistake they call them expenses, just the same as the banks, that is why they will not accept the RBS board’s resignation, they could be next because of their bonuses sorry expenses, otherwise let them resign and re-apply for their jobs, with a job description that ensures you do the job you are paid for, not overpaid for not doing the job. Then maybe they will be grateful for having that job. Because there are thousands of other people that would be grateful if they had a job.
All this does not matter because if the number of SME’s continue to close at the rate of hundreds as they have been, there will be no companies to use the banks, no employed people to use the banks, no local employment no local commerce. All that will be left is the huge companies that will dictate what you pay for and how much it will cost you., because for example all the large supermarket chains are expanding tremendousley across the whole of the UK opening new stores submitting planning applications by the dozen yet we are supposedly in a “recession” I wonder where they are getting their money from.
The government enterprise guarrantee scheme was never intended to work, it was there as propaganda exercise for the media, why because the bank criteria for lending under this scheme is the same as their normal lending criteria which has been upgraded to exclude the majority of SME’s that made money before the “recession” and would survive to make money again after the “recession” if they were given the help that the government enterprise guarrantee scheme was supposed to provide.
Did the government apply the same strict lending criteria that the banks are applying when they bailed them out because of the risks they took with “taxpayers money, if you have a bank account and pay tax it was your money they took the risk with”
The truth is the banks are only lending to businesses that have money in the bank and in reality do not need the loans to survive.
Many people have commented that the banks should not risk taxpayers money (but they already have and caused the recession with your money), to help the small businesses survive the “recession” , because when all the SME’s have closed you will not have a job, you will not need a bank account, you will not need loans, you will not be able to save and invest money.
But the government will need to expand to cope with the huge increase in the unemployed, so their jobs will always be safe. Look at your family, friends, workmates and neighbours I have and nearly everyone of them knows someone if not themselves that have lost their job or have had their hours cut to the bone or are working for companies that have only one order on their books and if they do not get another order they will also close.
You should also be worried that companies like Tesco and B&Q are making you the customer “till operators” for free, they are reducing staff by the dozen increasing their profits and making you do their work for free, next you will be stacking their shelves for free. Stop using these “Automated” stores we pay enough for the goods as it is.
Oh, by the way I am one of those SME’s a rural Convenience Store and Post Office in a rural village with no other shops or Post Office for 4 miles if we close, the hardship for pensioners, disabled and the increasing unemployed will be huge, but the bankers do not live in these rural areas and rely on the local services so they have told me we are not interested, even though we survived through the recession last year and made a small profit but beacuse we need help we do not qualify as we have not got enough money in the bank and actually need a loan (not a handout and a risk of “taxpayers” money, oh! and we pay a lot of tax as well).
I like this forum
My first test blog.