Despite all the political grandstanding surrounding the proposed bonuses to be paid to RBS staff, there is little that can be done about it and the government knows it. Don’t get me wrong, I am completely against the payment of bonuses to staff when the very fact that they still have a job is down entirely to the intervention of the government with taxpayers funds.
However, the fact remains that the vast majority of the staff will have some form of contractual entitlement to a bonus; the senior bankers know this and so do government ministers. For example, it is estimated that some £500m is due to be paid to ABN Amro staff and this was a pre-condition of the original sale of the business to RBS. If senior managers don’t honour their employment contracts, then they could very quickly find themselves in breech of contract and you can rest assured that there will be a massive queue of lawyers offering to take up their cases.
Gordon Brown is reported to be “very angry“, well, bully for him, what difference will his temper tantrum make? None! Treasury minister Yvette Cooper said any contractual or legal obligations on banks to pay bonuses at a time when they were making huge losses must be “challenged“. Yeah right Yvette, you know that there is little or nothing that can be done about it, which is why you squirmed so much when John Snow put some eminently reasonable to you on Channel 4 News last night. Alistair Darling is quoted as saying “I have spoken to the chief executive of RBS, and made it quite clear, and he agrees, that no-one associated with these huge losses should be allowed to walk away with large cash bonuses.” Quite right Mr Darling, but this is a legal issue, not a place for political rhetoric.
Even David Cameron demonstrates how out of touch he is by stating “As the principal shareholder, you are able to say what is and what is not acceptable.” True Mr Cameron and that is precisely the point, but you cannot do it retrospectively, if you had any business experience you would know that, unless of course, you are simply taking us all for fools.
The truth is this government rushed into “saving the banks from collapse” and in doing so, they left any commonsense back in the office. So keen were they to be seen as the saviors of the banking world, they did not complete any form of due diligence. I know that ministers and civil servants can often be accused of rank incompetence, but this goes off the scale. No experienced businessman and I mean not one, would blindly invest into a business, however urgent the need, without completing a full review of the business. As one contributor stated on one of my recent posts on the RBS fiasco;
Due Diligence is only half of the required formula for meeting the requirements under “Standard of Care” or “Due Care”. Due care is the second half of the diligence formula and equally as important. For without it, the standard of care can not be measured.
Performing Due Diligence identifies where investment risks or exposures lie, due care is exercising the requirements discovered under due diligence to protect or mitigate exposure from those risks.
Not only has the PM missed the first but importantly government has neither the resources, skills, or initiative to deal with the second which is what ultimately leads to failures.
In the normal course of events, due diligence would have uncovered that there were, amongst other things, contractual liabilities to pay bonuses; this would have included an estimate as to the likely cost. Had the government and its advisors acted with a reasonable level of care, arguably, this whole situation would have been avoided. Government could, for example, have included conditions which required staff to sign a waiver in relation to their bonuses. Alternatively, they could have been made redundant and re-employed on new contracts, the business after all was likely to collapse. Those that were expecting large bonuses, but had been party to significant losses, could have been warned that if they attempted to exercise there ‘bonus guarantees’ they could expect to be dismissed with immediate affect and could face a claim if they had acted recklessly or without a reasonable level of care.
I am not an employment lawyer, but I am convinced that there were (’were‘ being the operative word), any number of imaginative ways in which government ministers could have avoided this massive kick in the teeth to hard pressed taxpayers if they had acted with foresight and were in receipt of legal advice. Instead, once again, the rank incompetence of government ministers has cost UK taxpayers £billions.
There have been justified cries for the bankers to pay back their bonuses and even suggestions, quite rightly in my opinion, that traders should be sued for bonuses paid on what have subsequently turned out to be ‘questionable or toxic’ investments. These are perfectly justifiable initiatives, but what about the government ministers, surely they are equally culpable? Leaving aside the issue of regulation and so on (pre-bust), government ministers ordered a massive injection of taxpayer cash into banks without fully understanding the liabilities and obligations therein. At best, it demonstrates incompetence of the highest order and at worst, that they do not appear, based on the evidence currently available, to have demonstrated a reasonable standard of care.
This current political grandstanding and rhetoric is nothing more than a smokescreen designed to divert attention from the incompetent management of the whole banking crisis by members of this government. New Labour ministers have proven themselves to be incapable of humility, unable to accept any form of personal responsibility and aggressive towards anyone who would question their intent. That is arrogance in its most basic and crude form, the people of this country must not let them get away with it, government ministers must be held to account and accept moral and legal responsibility for their actions. Anything less would be an outrage to the people that will have to pay the price over the coming decades.
