Here’s a story that shows the power of pressure on even the loftiest of our financial overlords:
Stephen Hester, head of the Royal Bank of Scotland, gave way to heavy political pressure last night to forego his £963,000 bonus.
The final straw for the RBS chief executive appears to have been the looming threat of a vote in the House of Commons condemning the Government for failing to block the payment.
He is reported to have feared becoming “a pariah” over the controversy.
These people should be afraid of becoming pariahs. They should fear for their reputations. I’ve found these emotions to be almost entirely absent from our own Masters of the Universe on Wall Street, but in the City of London, at least, top bankers still worry about these things.
The other part is that we haven’t seen enough political pressure, certainly not from a political party, about bonus culture or the obscene profit-making from the very sector that crashed the rest of the economy. The real reason this happened at the Royal Bank of Scotland was that Ed Miliband, the leader of the British Labour Party, planned to force a vote on the bonuses in the House of Commons. Miliband had in hand a prior promise from Prime Minister David Cameron that he would block exorbitantly large bonuses in the finance sector. The triangle was closed between politicians, activists and the media, in this case.
Needless to say, we didn’t see that on the AIG bonuses, for example. In fact too many pundits and higher-ups threw themselves in front of the AIG executives, accusing those seeking clawbacks of engaging in class warfare and interfering in private contracts.
Social opprobrium, shunning, or whatever you want to call it can only go so far to serve the public needs. But when it rises with a political dynamic, then you can make progress.