A few thoughts on paying our RBS brethren. The best thing the board can do for all the shareholders at RBS is to reduce the government’s stake as quickly as possible, à la Bank of America. Diverting some portion of the bonus pool to repay the government or to reduce the size of the asset protection scheme might be tokenistic, but it would be good politics, and like it or not the board needs to be political.
Second, Banquo is on the board of a company that has an outsize compensation structure. This compensation structure needs to change, we know that. But wrenching, confrontational change will destroy equity value. There has to be a period of transition.
The alternative to managed adjustment of compensation processes is the painful, rudderless search for executive leadership now increasingly experienced (for different reasons) by ITV, General Motors and the aforementioned Bank of America.
The government knows that if Hester and co resign then the headhunters will draw up a shortlist with names like Chris Flowers, Archie Norman, Howard Davies and Callum McCarthy, all competent in their own way, but better the devil you know…
Related reading:
Would RBS directors really resign? FT Westminster blog
Banquo is still an active investor so will declare his financial interest where appropriate in any blog post.
