Saturday, 6 November 2010


"One problem we have is people don't want to join us because they believe we are not in control of remuneration," said Gulliver. "It would be unacceptable from the point of view of our shareholders if we were unable to attract and retain the type of people required to deliver profit."
Surely a delusion capable of swift correction. Consider the average employee. He/she goes to the HR and tells them that if they want to retain him/her they will have to pay him/her a sum considerable above his/her salary banding. He would speedily be directed towards the door and advised to test his worth elsewhere.
The excuse for the seemingly exorbitant rewards to those in the banking and financial sphere is that it has all been reviewed by their Remuneration Committee. Big deal - they are but employees of the enterprise and are likely to adhere to religion. The Scripture says, "Do not muzzle the ox while it is treading out the grain," and "The worker deserves his wages."
My objections are directed to the supposition that just one person can so direct and lead the organisation so as to achieve the sort of profit they do achieve. That needs teamwork - we have seen just what damage a rogue trader can inflict despite the assumed talent of the Boss Man. If they fail, they walk away with the inflated sums he has been paid before his bubble burst. All he loses is his bonus calculated on results; that may well be cushioned by Golden Parachutes. If the selection process were better handled, we would not be in the straits we are now and Government support would not have been needed.
Recruitment of new senior staff is mostly put out to specialist agencies. They hunt data bases for likely candidates, do a shuffle and nominate a short-list. Their fee is a proportion of the salary finally achieved so they will obviously favour the £750,000 pa applicant over Mr £500 grand. Any subsequent failure will be explained "he was OK when we put him forward. Don't blame us"
We need Government action to control all salaries. The implied blackmail used by those seeking the top jobs - "if you do not pay me (this) I'll go elsewhere" can be countered by creation of the situation that there is no higher paying position. Pay him a end of year bonus if the results justify it. The cost of this comes off the bottom line. There needs to be a bonus pool - if Mr X gets 30% of the pool there is less for everyone else. All employees should benefit in proportion to any bonus; this to correct the situation where the highest paid receives a reward that is proportionally many many times the raise given to the lowest on the greasy pole.
At one time I worked for a company where the Head Honcho laid down a rule for anyone asking to employ a new worker could do so but their payroll budget would not be increased. It worked very well. So what makes the banking and finance world such a different beast?

Times of interest

"We'reFacing a Coalition of the Heartless, the Clueless and the Confused"
The Times cartoon and the quotation from the New York Times just confirms that our problems in the UK are not unique.The view of an American economist regarding 'incentives' is:
"Do unemployment benefits reduce the incentive to seek work? Yes: workers receiving unemployment benefits aren’t quite as desperate as workers without benefits, and are likely to be slightly more choosy about accepting new jobs. The operative word here is “slightly”: recent economic research suggests that the effect of unemployment benefits on worker behaviour is much weaker than was previously believed. Still, it’s a real effect when the economy is doing well.

But it’s an effect that is completely irrelevant to our current situation. When the economy is booming, and lack of sufficient willing workers is limiting growth, generous unemployment benefits may keep employment lower than it would have been otherwise. But as you may have noticed, right now the economy isn’t booming — again, there are five unemployed workers for every job opening. Cutting off benefits to the unemployed will make them even more desperate for work — but they can’t take jobs that aren’t there"
Apart from a few grey beards, our Cabinet is mainly composed of people with no great experience of being in Westminster. Their ideas were formulated in pleasant soiree graced by others of similar circumstances and grand ideas but not a lot of cut and thrust opposition. Their time in opposition allowed then to see how their changes might be implemented. The Punch and Judy politics led them to believe that decisions were won by those who said the same thing consistently and loudly. When questioned by political journalists, they made little effort to answer or respond in any way other than to repeat their brief - consistently and loudly. Both Cameron and Clegg face a core of Members who retain their loyalty to their party credo and have no time for coalition. Maybe they have been reading the same definition that I have always applied to the word coalition - "a temporary alliance of factions, nations, etc., for some specific purpose, as of political parties in times of national emergency"
Well, those ideas and plans formed pre-responsibility have now mostly been revealed to us. Mostly - we have many bullet points but the majority lack the crossing of Ts and dotting of i. The cartoon details many pledges that the LibDems have had to abandon, maybe the excellent cartoonist will favour us with one to see what the true blues have had to swallow as the price of the temporary alliance. I see it as akin to two Mafiosi capo uniting to overcome the capo di capo which, when achieved, will allow them to set about each other.
Many dreams of a brave new world have already failed to survive when dragged into the light of today. I was struck by from someone whose background suggests he knows whereof he speaks
"In the run up to the 1979 election, Margaret Thatcher presented a distinctive and radical offering to the electorate. There was then a keen consensus that it was a crossroads election which had the potential to change our entire national direction. Similarly, during the 2010 General Election, the appetite for a new approach was tangible. Yet there was little complementary sense of what our direction should be.

When the Conservative government took control of the public purse in the final year of the 1970s, our nation had been subject to monetarist policies for two-and-a-half years, courtesy of the IMF. In essence, the toughest decisions on public spending had already been made. In contrast this year, while there was a superficial acceptance that the best economic times were over, the sheer gravity of our massive economic problems was lightly skated over during the campaign skirmishes. No sense was there that the electorate was prepared to take a painful personal hit following our collective national profligacy. Indeed it served the interests of all three main political parties to confine any economic discussions to a fatuous battle over public spending cuts of £6 billion – a sum borrowed by government every fortnight over the past year.

The public was ready to embrace change in 1979. Today the electorate has seemed unwilling to grasp the seriousness of our national economic situation. The breathless, relentless media coverage of the past two years, charting dramatic stock market swings, house price crashes and global turbulence, has convinced many that the worst is behind us without the headlines having ever truly translated to the situation on the ground. This makes it all the more difficult to persuade a complacent public that an era of financial reckoning lies ahead
So, blame the bloody MSM again but much of the Spending Review was so broad as to leave us shocked when the details were filled in. The party in power has had to row back on quite a few ideas. Worse, we have had instances where humanity has led us to give away with the right hand much of what the left hand has clawed back. An unemployed, lowly educated, father facing reduction of State Benefits and possible eviction from the family home has little sympathy with, say aid to Haiti when vast sums have poured in from the international community but the place remains in the state we see today - a full year after disaster struck.
Someone with whom I was in dispute with in Belfast once capitulated with the wish that I might live in interesting times. I suspect the Coalition may find itself in interesting times before their ship comes home.