“So is she a ginge?” asked the chairman of the improvidently-sized investment company Second Coming Asset Management as we met at The Hannah Lily Rebecca for an eye-watering pint or two of Just A Shade Under Nine Pounds Thank You For Caring. “Actually, we prefer the term Strawberry Blonde,” I replied. “Or, at a pinch, African Sunset.
“Still, I’m glad personal questions are on the agenda today as I was hoping to hear your thoughts on the FSA’s continuing work on remuneration structures. I take it you received their ‘Dear CEO’ letter to all banking bosses on that matter?””As the boss of ScamBank, why wouldn’t I have done?” asked the chairman defensively. “I trust you’re not implying ScamBank’s not a real bank just because, at the moment, it doesn’t happen to have any money on deposit or indeed any clients?””Absolutely not,” I replied. “After all, if everybody started using benchmarks as woolly as deposits and clients when defining what constitutes a bank, there’d hardly be an institution worthy of the name at present.”
“Precisely my point,” nodded the chairman. “As for the FSA’s letter? Well, first up, you have to give them credit for trying.” “Don’t you have to say that?” I asked. “Too right,” nodded the chairman. “You never know who’s listening. Still, fair’s fair, they’ve obviously put a lot of thought into it – you only have to look at their annex of good and bad criteria for remuneration policies to see that.
“Mind you they do appear to have got hold of Scam’s own policy on pay packages from somewhere because about half of that seems to have been reproduced in the annex – word for word.” “Would that be the half that constitutes good practice or the half on what very much not to do?” I asked. “What do you think?” replied the chairman sardonically.
“So I’d say they’ve gone a bit strong – not least the bit about the need for human resources to have a strong and independent role in setting pay structures. After all, since when did a strong and independent role for human resources anywhere become a requirement for anything useful, positive and/or worthwhile?”Aside from that, what I like about the letter is the rather coy way the FSA has gone about trying to persuade the banks that this is, guys, like, you know, the only sensible way forward. So there is a lot of ‘we believe this’ and ‘we suggest that’ and, if the watchdog is really trying to get something across, ‘we expect the other’.
“Which is all highly amusing because you know that’s not how the FSA likes to work and really it’s just itching to tell us not only how we should structure pay but for how much too. Hence the regret that oozes from lines such as ‘it is difficult to be prescriptive about remuneration policies’ and ‘this letter does not constitute formal guidance from the FSA’. You can almost hear the gritted teeth.
“But, if I’m honest, I suppose my main feeling about all of this is that it falls squarely into the category of closing the stable door after the horse has bolted – along with the family silver. I mean, the payment of comedy salaries isn’t exactly a new phenomenon in Her Majesty’s financial services industry, so I’d say the FSA have been a smidge too slow on the draw here.
“The people who helped propel the banking industry into this mess have all pocketed their enormous bonuses and disappeared to buy an island somewhere. Meanwhile we’re left focusing on cutting back on pay packages at a time when we should be looking to attract the very best candidates to help rebuild things – only in a brighter and shinier way.”
“Don’t be so modest,” I smiled pointedly. “Not every big banking cheese has left the building.”
“How dare you?” spluttered the chairman. “Yes, I may have made a million or two out of ScamBank last year but have you thought about the guilt I’m experiencing as a result? I have to live on that for the rest of my life.”
“Shouldn’t that be ‘live with’ rather than ‘on’?” I suggested. The chairman merely shrugged.