How much is a banker worth? The question arises as top earners squeal over European Commission proposals to close the growing gap between the amount paid to chiefs and workers. Reporting on the draft plan which would give shareholders the right to vote down the ratio between board pay and average full time worker, the Financial Times estimated that executives in the big banks are paid in excess of 100 times more than the average worker on their pay roll.
What is their true value?
In 1990 Bruce Pattullo, the outstanding banker of his generation. retired as Chief Executive of Bank of Scotland. His achievements in terms of consistent returns to shareholders, high levels of customer satisfaction and staff loyalty, have not been equalled since. He also gave unswerving moral leadership which ensured that the Bank treated its customers with respect, openly and honestly. He was paid 16 times the average salary in the Bank and thought himself fairly rewarded.
In 2000, the last year of the Bank’s independence, Peter Burt, Pattullo’s successor, was paid 18 times the average. A year later James Crosby, the first CEO of the ill-fated Halifax Bank of Scotland (HBOS) had total remuneration 43 times the average of his staff.
The FT has calculated that Antonio Horta-Osorio, Chief Executive of Lloyds Banking Group, which now owns Bank of Scotland, was paid 125 times as much as his staff last year. By any objective standards his achievements cannot match those of Pattullo and as for moral leadership, the record fine imposed on Lloyds last year by the Financial Conduct Authority for selling 700,000 customers investment products they neither needed nor wanted, suggests it is lacking.
Can there be any more graphic illustration of the fact that banking has been taken over by its executives, to the detriment of everyone else?
This week, while Oxfam publishes a report on the growing inequality in Britain (Five families own more than poorest 20%), Vince Cable has questioned why bankers need to be paid more than £1m a year and Ed Balls has described pay for top bankers as ‘a bit of a Ponzi scheme’. But so far there is no sign that bankers are willing to close the pay gap. Andrew Tyrie, chair of the parliamentary Treasury Select Committee who has repeatedly called for pay restraint, sees only one alternative: “The new consensus emerging on pay remains seriously flawed. It will now be up to regulators to do the job.”