Bonus

So why exactly do bankers get a bonus? Starting with the reality for the vast majority of bank workers bonuses aren’t 6 let alone 7 figures. Heck 5 is way better than most. That aside, the thing to bear in mind is employers luuurve the bonuses because they’re discretionary and as such a powerful lever, which means stuff like:

1) They’re non-pensionable. Base salary 20 grand, bonus potentially another 30? Tough, you’re pension is set entirely in relation to the 20 grand. But, when you advertise the job you talk about the 50, i.e. you spin things.

2) This has an appeal to employers cos offering more money means a wider pool of candidates to choose from when recruiting, but for less than it actually appears (this is an uncomfortable point to make because it’s predicated on the assumption some people are better at shit than others, which the credit crunch obviously challenges even if it is still true on average).

3) Bonuses are flexible. Good year for profits? Bonus. Bad year in an organisation where labour is a key if not the key cost? Cut the bonus and cut the costs i.e. what employees, based on years of experience, regard as a routine part of their total pay can be readily flexed to suit without all the negotiated shite you’ve seen in the public sector over pay freezes.

4) Bonuses can be used tactically, like is she no earning as much as he is for doing the same job? Well then she’ll get a bigger bonus than him won’t she (ideally). Gendered pay inequality? Not on a total package basis (ideally).

5) Oh, oh, now she wants to leave for another employer, there’s a dependency on her and it’d cost what she earns and then some to replace her, then train up a replacement. Pay a big bonus and hopefully she’ll stay.

6) Alongside shit like that bonuses are actively and aggressively used to encourage effort. Hence the sustained periods of free overtime, lip biting when given yet another unreasonable request, travelling hither and thither at the drop of a hat and so on shit that makes up private sector work. Like consider the following couplet: TOIL? Yes! Bonus no. TOIL? No! Bonus yes.

7) Finally banking is about sales. Rather than bonus you’re probably better thinking about a lot of what bankers get as sales commission. Except, banking is too “posh” to see things that way, hence the use of the word bonus.

As for those not selling product, like me fer instance, the potential discrepancy between sales jobs that pay a basic wage plus a commission (i.e. a bonus) and every other job would be so large, no one would want to work in back office roles or at least no one worth a damn. Hence, bonuses across the piece serve to lubricate organisational labour markets (however, don’t think for an instant that back office roles pay the same kind of bonuses sales people get. They don’t).

Please don’t confuse any of the above with justifying the way things are. I can think of huge great examples where bonus arrangements have been bent, buckled and gamed typically by high heid yins intent on awarding themselves bigger bonuses at the expense of as many people beneath them as possible; in practice the system is flawed and abused. And personally, I’d much rather get a one off pensionable pay increase and have done with it. Except that would run counter to how employer’s actively use bonuses as a means of asserting managerial discipline so it ain’t gonna happen.

But, please do note none of the above has much if fuck all to do with a bonus being a reward for exceptional effort and/or performance, which appears to be the Labour party line. Realistically, if you work in finance and don’t get a bonus, chances are you’ll be getting managed out the door within the next 12 months. Essentially, the Labour party rhetoric is an appeal to potential voters who don’t participate in, know or recognise this system. Like to compare and contrast, in the public sector length of service is frequently king. Another year? Another increment thank you very much. Except the notion that an unpromoted teacher with say 4 years service is genuinely worth less than one with 5 years on a consistent basis across the piece purely because of that 1 extra year is facile (and a reminder of the different bargaining power labour currently has in the public sector).

As for 6 and 7 figure bonuses I’ve no idea. I saw a scratch card recently called “Rich for life” that paid winners £40 grand a year for life. That, it would seem, is what most people regard as rich (I know I’d certainly jack it in if I’d won). Comparing that to all the headline grabbing bonuses, one very obvious point is that when you think about the recipients of those you’re dealing with a different (frequently psychopathic) mind set altogether. Hence, my view that when it comes to big bonuses you need a sociology rather than an economics of pay because what most folks regard as normal simply doesn’t apply.

Feargal the perfect cousin

You can’t seriously justify internet piracy. But, some context would be nice, that and some history of the megacorps on whose behalf tax payer funded public servants are threatening to lock ordinary punters up for 10 years *.

Starting with the history, from Brothers in Arms onwards major record companies spent over a decade profiteering from people replacing their LP collections with CDs, doing little more than sitting back and reformatting their back catalogues, all the while pissing away easy profits on “flowers'n'chocolate” and shit bands.

Of course all good things come to an end and eventually it became apparent there were only so many special, special, deluxe editions people were willing to buy before they started asking why the damn things weren’t remastered with bonus tracks in the first place. The record companies by this stage were presumably hoping for another format to emerge and it did, kind of.

Unfortunately for them it was the combination of MP3s and Napster. As a result the record company business model of the latest thing releasing one single, then another, then touring to promote an LP (auto-repeat 12-18 months later) plus ripping off punters via back catalogue CD sales started to creak. Interestingly, this business model was and is similar to pharmaceutical companies, another set of marketing and distribution machines that exploit little legal monopolies for as long as and in as many ways as possible. Anyhoo when Napster appeared the record companies responded in a predictably legalistic fashion with Lars Ulrich for some reason becoming the multi-millionaire fall guy intent on undermining any cool, hip or happening cache the recording industry had ever tried to claim.

Napster lost, the record companies won, but other methods of distributing pirated material had already appeared. The point they embodied was straightforward; record companies had repeatedly proven to be incapable of developing new business models that met emerging consumer demands because they were focused exclusively on preserving an existing one dating back to the 1960s (but not in a hippy way). In simple terms record companies were shown to be shit at business and addicted to the strategy we know and love today of using the law and lobbying to mask their failings.

And so it continued to the point where it reached ridiculous levels here when Feargal Sharkey, as the UK record industry’s spokesman, claimed publically that record company sales are a key contributor to the UK balance of trade and A&R is capital investment in a lets all borrow big boy chat and pretend Simon Cowell’s talent shows and stuff like say Sony, rather than "investing", simply buying Creation records so it could acquire Oasis didn’t and doesn’t actually occur (the parallels between that and say Glaxo buying a small business that’s developed a new drug are uncanny). More off putting was the record industry essentially writing the Digital Economy Act that Labour rushed through as one of their last acts in government after Peter Mandelson had some good times on David Geffen’s yacht.

I say ridiculous for various reasons. One, Feargal shall now be forever remembered as a wanker for reasons other than Teenage Kicks. Two, trendy record companies are repeatedly bringing the heavy-heavy handed legal threats at the same time as trying to be well, trendy. And three, they're continuing to use our legal system to hide their inadequacies as businesses at the same time as claiming to be a British business success story.

What the record companies now want is open to debate. One option I’m sure they dream about is taking us back to the early days of the last decade when you (well me) paid up to £21.99 for a single CD and that’s that really. The price hike in Whitney Houston greatest hit CDs following her death that was quickly put down to technical error (aye fucking right) supports this view. But, speaking as a consumer, would them being able to charge me anymore make for better product? Not going by past experience it wouldn't, rather the main difference it would have made was that Guy Hands top of the cycle, over paid leveraged buy-out of EMI would have probably worked, and that's kinda it really. The 80s, after all, when CDs emerged and profits were easy, was also the decade taste forgot as every second hand record shop bargain bin proves. Alternatively, record companies want to buy into something more akin to the cloud computing model other people have devised wherein nobody owns anything, but in exchange for a monthly fee can rent stuff for immediate - but restricted - consumption.

Either way, actually neither way, they just want people to stop pirating their product regardless. You’re left with the sense that while Britain may make the best popular music, the owners of the resultant copyrights are shite businesses. They may claim, when it suits and it isn’t the post-Christmas sales lull music award/ marketing season, to be just another business, which is fine, but can we please acknowledge that what they mean by this is they're more British Leyland than Tesco?

As for other media, fucks knows, just different flavours of exploitative, deceitful scum as the multimedia conglomerate News Corporation with its bye bye News of the World, hello Sunday Sun proves. Sky TV is a cash cow so they’re clearly still in the money and cinema is doing well give or take DVD sales presumably though here you’re left with that annoying thing of only stuff you legally buy comes complete with anti-piracy stuff you’ve no choice but to sit through.

The thing is though another reason music sales fell was because other, competing distractions appeared. It wasn’t just that people were choosing to download stuff, they were also spending more of their time playing games and surfing the net. And with their being only so many hours in the day (something the Digital Economy Act foolishly failed to address), something had to give. The other thing, the big thing no media conglomerate is willing to admit is the repeated finding that those most likely to download pirated material are also those who spend the most on legal stuff i.e. pirated stuff is as well as not instead of. Hence, the £15m p.a. losses record companies claim the RnBXclusive.com website induced are talking bollocks in a why are these people being allowed to tell such blatant lies at the same time as they’re getting to threaten people with severe legal action?

Thankfully, with the shutting down of megaupload, the emasculation of filesonic and so on we’ve got some lovely data emerging that can be used to empirically test all the media conglomerate shite about piracy; now that stuff isn’t as readily available as it was are legal product sales on the increase? Well? It’d also be quite cool to get a handle on the unintended consequences of going after easy targets/encouraging people to go underground to get pirated material.

In the meantime can we at least acknowledge the fact that the media conglomerates intent on criminalising vast swathes of the population have an undue influence over the legislative process, are ridiculously exploitative and have proven repeatedly incapable of adapting to new technology and changing consumer demands? That and the fact that because of them the living stain of faux big-sister diarrhoea that is Jo Whiley was used to explain the “mighty” Digital Economy Act on Panorama, a crime for which no one shall ever be forgiven.

* You’ve got to love the way that once the story broke and made it into the mass media the 10 year threat was taken offline. You’d almost think a PR/marketing bod suggested aggressively threatening to criminalise punters was perhaps not the best thing to do.

If I was a rich man

Professor Andrew Lo’s review of 21 books about the financial crisis is a lovely thing in principle; he read them so you don’t have to. Professor Lo also abstracts from the various interpretations kicking around to make some interesting points, or at least tries to in a here’s MY review, oh yes, MY review of things kind of style.

The one that got me because it’s so topical was his footnote 'n’ quote driven dissing of the following notion that he says has “become part of the folk wisdom of the crisis - Wall Street compensation contracts were too focused on short-term trading profits rather than longer-term incentives. Also, there was excessive risk-taking because these CEOs were betting with other people’s money, not their own.”

Instead, Professor Lo responds with “in a recent study of the executive compensation contracts at 95 banks, Fahlenbrach and Stulz (2011) conclude that CEOs’ aggregate stock and option holdings were more than eight times the value of their annual compensation, and the amount of their personal wealth at risk prior to the financial crisis makes it improbable that a rational CEO knew in advance of an impending financial crash, or knowingly engaged in excessively risky behavior (excessive from the shareholders’ perspective, that is). For example, Bank of America CEO Ken Lewis was holding $190 million worth of company stock and options at the end of 2006, which declined in value to $48 million by the end of 2008,5 and Bear Stearns CEO Jimmy Cayne sold his ownership interest in his company—estimated at over $1 billion in 2007—for $61 million in 2008.6 However, in the case of Bear Stearns and Lehman Brothers, Bebchuk, Cohen, and Spamann (2010) have argued that their CEOs cashed out hundreds of millions of dollars of company stock from 2000 to 2008, hence the remaining amount of equity they owned in their respective companies toward the end may not have been sufficiently large to have had an impact on their behavior. Nevertheless, in an extensive empirical study of major banks and broker-dealers before, during, and after the financial crisis, Murphy (2011) concludes that the Wall Street culture of low base salaries and outsized bonuses of cash, stock, and options actually reduces risk-taking incentives”.

Phew. Except, hmmm. No. Actually this is what you call knowing the price of everything and the value of nothing. If I were inclined to do the math(s) or even the arithmetic, I’d note how Ken Lewis’s wodge of stock fell over 74% in value. Ouch. I mean crikey the credit crunch cost him at least $142m. Ouchy, ouch. Over here where executive pay hasn’t yet reached American levels you could do the same kind of thing for the those who ran the subsequently bailed out banks into the credit crunch or at least you could in percentage terms, but absolutes? Nah, they lost millions not tens or hundreds of millions.

The thing is though even after all these terribly important people lost all this dosh (well actually they didn’t cos it was shares they’d have had to sell to get their hands on the moolah), they were and are all still very rich. 1% rich even i.e. the “penalty” for (some of) the people who caused the credit crunch is that they’ve tumbled all the way from fuck me they’re rich to fucking rich or to quote the handy dandy Institute for Fiscal studies online questionnaire about where you are in the distribution of income in the UK - if you were on Mr Goodwin’s pension right now you'd discover “Your income is so high that you lie beyond the far right hand side of the chart”.

Hence, references to “risk-taking incentives” are beside the point; these people simply weren't taking any meaningful economic risks or at least not ones even remotely comparable to say I don’t know the printers currently being asked to vote on a 10 to 20% pay cut. So whereas yer average punter isn't taking the kids on holiday this year and is having to watch the weekly shop like a hawk, for a Ken Lewis all this means is buying 2 rather than 10 new Bentleys.

Instead, rather than an economics of pay, at these levels an open and honest sociology makes far more sense. Some of the obvious stuff this would have to draw attention to would be as follows; every year the charismatic, experienced and successful people (no seriously) that make up the board of yer typical PLC take their CEO aside and tell him that he’s so insightful, strategic and lovely, so best in class and thought leadery that he as a person is worth millions and millions of pounds. Not just one, or two, but millions and millions. And see that corporate jet you wanted? It’s over there. A chauffer? He’ll be round tomorrow morning. And apologies for not asking before, but do you like your grapes peeled or unpeeled?

Now, the notion that such institutionalised, positive-reinforcement didn’t, doesn’t, couldn’t or can’t turn an executive or a trader's or anyone's head is ridiculous. Rather, the way Professor Lo presents Wall Street contracts as a folk-loric contributory factor is a convenient straw man. Sure sure those in charge lost big arithmetically, and? A crucial and key driver of the credit crunch was an arrogant hubris that reached monumentally destructive levels. And this hubris WAS fed by Wall Street contracts (along with those signed in the City of London and elsewhere) that awarded fortunes every year and were primarily set in relation to how rival egos were being similarly massaged.

Personally, I think Sarah Beaney’s Property Ladder telly programme still illustrates this better than however many books on the financial crisis; every episode some dicks bought a house to develop then spent so long fucking it up the rising market meant they still made a profit. Except they actually believed this was due to their great acumen and risk taking endeavours as opposed to fortunate circumstance. So was executive and banker pay a factor? You totally betcha! And no, not because of the absolute amounts at stake, rather it was the relative numbers presented each year on paper and the impact that and the associated rituals had on the egos of key individuals.

Like Ken Lewis, I'm sure, thought he was the dogs and why shouldn't he? Every year he was handed a multi-million pay package and as we all (used to) know people awarded that amount of dosh don't make catastrophic decisions. So sure he had a lot to lose, but does anyone think that when Ken made decisions he seriously took into account the possibility of him actually losing well anything really? Like really?

The other thing are the challenges now being made to it all. Like we’ve been told for however long that the rich need to be rich because then we’re all better off, except no we’re not actually. Or, as is the case here, we get references to “an extensive empirical study of major banks and broker-dealers before, during, and after the financial crisis, Murphy (2011) concludes that the Wall Street culture of low base salaries and outsized bonuses of cash, stock, and options actually reduces risk-taking incentives”. Except no they didn’t i.e. dull stuff like reality makes utterly fucking clear the current system didn’t and doesn’t work as a means of risk management let alone wealth creation for society as a whole.

Rather, Gramsci’s theory of hegemony and how the ruling class defines the common sense of an age is what's increasingly relevant because the "common sense" we've been fed is thankfully and increasingly being questioned in ways that expose it as a pile of self-serving shit.

They call me Mr Goodwin

Nah, that's no really fair to Mr Salmond cos the following letter the former RBS "economist" wrote to Mr Shred in May 2007 suggests he actually quite likes Mr Pariah: "I wanted you to know that I am watching events closely on the ABN front. It is in Scottish interests for RBS to be successful, and I would like to offer any assistance my office can provide. Good luck with the bid. Yours for Scotland, Alex"

Another more serious point of course is now that the seal's been broke can we expect to see other "Sirs" getting had up, like whaddabout Sir Callum McCarthy, the chair of the FSA when shit went tits up.

Petty political points aside, I'm far more interested in what the catering staff Mr Goodwin threatened with disciplinary action over serving the wrong type of biscuit have to say about it all. You know those real people who were subjected to his "management style" and unlike the direct reports subject to "Monday beatings", were earning fuck all as compensation.

P.S. (Feb 5th) a fabulous person pointed out the irony of Mr Goodwin's punishment - reducing a former member of the ruling class to the same status as the rest of us. The aforementioned fabulous person also opined it was a shame to take Mr Pariah's knighthood away because leaving him with it would have been on ongoing reminder as to how fucked up the ruling class he was a part of actually is. Ahhh, so that's why they took it off him.

Big Boy? Pants.

The Epicurean Dealmaker blog, is a really good blog that's both more literate and articulate than this thing and far more popular. But ……..… from a British perspective at least his latest chat on private equity strikes me as a bit iffy.

Add in a J-curve reference and I reckon his succinct summary of what private equity is and does could grace any finance dictionary. Except, reading it again I reckon there's another thing missing; history, which matters because the Dealmaker’s account is intended to justify as well as explain private equity.

For the Dealmaker private equity “is a valuable part of the financial ecosystem. It is particularly suited to helping businesses which require some sort of transformation, in structure, methods, and/or capital, in order to improve their value …. they are not asset strippers, “vultures,” or liquidators, either. Think of them instead as boot camp drill instructors, whipping out of shape or underperforming laggards into top-flight athletes.”

Hmm, this is the new management with no vested interests taking over and stripping out all capital consuming fat, chopping off any inefficiencies and implementing a new business model view of private equity where making money is almost entirely about adding value then selling on. It’s a lovely view and perfectly in keeping with what any self-respecting member of the British Venture Capital Association (BVCA) – the British private equity trade association - would tell you in public (Jon Moulton being a possible exception here).

Except right from the outset there's some economical with the truth thangs going on. An obvious one is that the bulk of the BVCA’s members aren’t venture capitalists at all just as the bulk of BVCA member deals by value and volume don’t involve venture capital. Rather, they're private equity bods who buy and sell established concerns, an arguably less moral activity than venture capital investments in wholly new businesses (the US equivalent here presumably being the rebranding of leveraged-barbarian-at-the-gate-buyouts as private equity). So yeah, this is a type of finance that tends to hide behind more user friendly labels.

Anyhoo, I reckon the Dealmaker misses a big trick with his chat on “dividend recapitalisations, when he says “dividend recaps … the relatively recent phenomenon of financial sponsors borrowing additional debt through their portfolio companies during the life of their investment, and using the proceeds to pay equity dividends to themselves and their limited partners”.

Now note the immediate qualification – “this is a relatively recent phenomonenon”, then ponder a while the actual nature of M&A activity over the last 100 or so years in Britain which is this - it occurs in waves.

Like according to Leslie Hannah’s Rise of the Corporate Economy you can, somewhat arbitrarily here, identify the peak of previous UK M&A waves occurring in 1881, 1898-1900, 1919/20, 1929, 1959-68 and 1973. Latterly, ONS data shows the number of mergers and acquisitions unsurprisingly peaked in 2007, the total having grown strongly from 20003/04.

So there you are then. Whereas the Dealmaker sets out generic notions as to the benefits of Private Equity, the reality appears somewhat different; actual dealmaking activity has repeatedly clustered around specific points in time. This, of course, is due to the influence of period specific factors, an obvious one latterly being the shifting willingness of banks to lend. I say shifting because well it does as was illustrated by the pre-credit crunch emergence of cov-lite debt i.e. debt sold to private equity investors with few if any of the covenants previously imposed by lenders so they could manage the risk they’d decided to take on. And lets be clear the emergence of cov-lite lending and the associated willingness of banks to lend against ever more aggressive multiples was a product of them competing to lend so they could hit their quarterly/annual sales targets.

What it was not was not a sudden recognition of private equity’s boot camp-like qualities. Rather, in practice bankers were eventually tripping over themselves to throw money at private equity. Now here is where a big boy defence presumably comes into play - bankers are big enough and ugly enough to do the appropriate due diligence and if they weren’t, well tough.

However, a criticism of private equity the Dealmaker seeks to challenge is that it loads up companies with unsustainably high levels of debt that ultimately fuck them in an eventually making lots of people redundant kind of way. Now if I was minded to argue private equity wasn’t to blame for well anything really, I’d argue that if someone offered me mad amounts of debt for hee haw, then of course I'd take it. Heck I could even cite the example of Focus DIY, bought for a couple hundred million and collapsed owing businesses, shareholders and funders around £1bn i.e. the private equity buyers had gone mad for the “dividend recaps” the Dealmaker mentions just in passing. Except with Focus this appeas to have been how the money was REALLY made, which as the Dealmaker points out is the primary purpose of private equity. Operating efficiencies, new store layouts? I guess, but really it was about borrowing as much as possible then taking as much of that money out the business as possible via dividends (and I'm no even mentioning the sale and leaseback asset stripping other private equity bods did elsewhere in increasing numbers in the run up to 2007).

Except, that’s not quite in keeping with the boot camp instructor account of private equity is it? Rather, its about being able to spot someone dumb, desperate and/or arrogant enough to lend more (and more) cash than was ever paid to buy a business so as to do a "dividend recap" as a key determinant of private equity returns. And if the business fails, as Focus did, and people lose their jobs, then hey ho.

The other thing recent experience shows is that in an M&A wave, you know a fad, a euphoric precursor to a crash during which a disproportionate number of deals get done, being able to identify patsies, ahem, bankers (and in an aggressively competitive environment there will always be a few) becomes increasingly important as all the low hanging fruit gets plucked (a practical example here being the chat about taking Sainsburys private that in reality appeared based on f'all more than the ready availability of cheap debt vs expensive equity). So much so in fact, given the persistently wave-like nature of M&A activity, I reckon its worth taking away any qualified references to "dividend recaps" and emphasising how a key skill (value add even) of private equity is its ability to spot a dumb banker at 100 paces. That and exploit tax arrangements of course.

Being and not being serious about executive pay

My initial criticism of the bollocks being shat about the RBS CEO’s bonus was primarily that it pandered to the media’s dumbing down agenda of reducing everything to personalities an approach personified by the ghastly as he is vain Nick Robinson. It’s also a disingenuous attempt by posturing politicians to pretend they’re doing something, when they actually aren’t. Except they are. At this “historic juncture” I reckon what’s so fucked up is that this bonus furore distracts from more serious (and complex) underlying issues.

So lets start with some facts. Early last year the HSBC CEO got a £5.2m bonus and the Barclays CEO got £6.5m, the latter being famous for stating "(t)here was a period of remorse and apology for banks and I think that period needs to be over". Neither had as fucked up an organisation or as many stakeholders or pressures to deal with as Stephen Hester i.e. Hester is doing a harder job for less money than his immediate peers and even if these other bods waive their bonus this year, they’ll still have oodles in the bank from 2011. Plus there’s also however many dozen more hedge fund managers and traders raking in more than Hester except they’re currently doing their damndest to go Greek on Greece. So is Hester the unacceptable face of an over-paid, if currently state backed, capitalism? Nope.

Despite this Hester getting pilloried in the press allowed some rim-jockey retard on the Guardian website to state he should only get paid as much as a primary school headteacher, a primary school and a global financial conglomerate employing >100,000 people being apparently interchangeable institutions. Alternatively, such fucktardness illustrates the level of debate underway, one that ignores dull stuff like Hester could walk into an easier job tomorrow that pays him as much or more than he’s getting and do so whilst being widely regarded by his peers as the victim of a witchhunt. It also ignores even duller stuff like the RBS share price and credit rating would get humped due to the management upheaveal this would cause and the resultant perception of political interference i.e. the posturing going on right now would cost the taxpayer a damn sight more than Hester’s bonus.

Really what the above illustrates is how fucked up politicians have deliberately made things. The issue IS NOT should Hester get a million pound bonus, instead it’s whether the system that sets executive pay is working and to a lesser extent is Hester the right person for the RBS job. The second of these is easy to answer; given the RBS board and UKFI both seem happy with him, yes he is. The first part is the far more complex problem, because no it isn’t working and is in fact a growing social problem, but one no major politician appears willing to seriously address.

Rather, to get a sense of scale about what's going on you need to read the Bank of England Governor Mervyn King’s comments from the other day: “Above all else, we must strive to maintain support for a market economy and an open world trading system. They provided the basis for the great prosperity experienced since the Second World War. The tragedy of the financial crisis is that those who have suffered most have been those who bear no responsibility for it, and who, whether employees or businesses, accepted the disciplines of a market economy only to find that others were excused that discipline because they were “too important to fail”. But the legitimacy of a market economy will inevitably be challenged if rewards go disproportionately to a small elite, especially one which benefited from the support of taxpayers. Those taking decisions on remuneration, in the financial sector and elsewhere, need to understand that a market economy rests not just on incentives, but on the acceptance that the distribution of rewards is fair. That sense of fairness underpins the commitment to a market economy” i.e. the basic legitimacy of Western capitalism is being called into question.

Crikey, them’s big potatoes. And the political response so far? Wouldn’t it be nice if things were a bit more John Lewisy and that RBS bloke shouldn’t get a bonus should he.

What this leaves us with is a seemingly untouchable economic elite intent on remaining just that thank you very much and a professional political class too removed, too ignorant and too power-obsessed to appreciate let alone articulate a growing degree of discontent and disenchantment that can only grow as public sector spending cuts persist, high unemployment continues and yer average punter finds inflation is still eating away his or her disposable income, albeit at a slower rate, in an economy where you can no longer borrow cheaply enough to paper over the cracks.

Slightly smaller potatoes would be changing the principles used to set executive pay given the current ones continue to generate economic inequality (not just, as Vincey-tit is largely suggesting, tweaking how the existing participants participate). Are politicians likely to do this I wonder? To give some random examples Tony Blair of JP Morgan and Zurich Financial Services, Norman Lamont, a consultant and advisor to various investment funds, Lord Andrew Turnbull, the former head of the UK civil service who chairs the hedge fund BH Global, or Patricia Hewitt, the former health secretary and an advisor to Cinven, the private equity house that bought BUPA, all seem perfectly placed to help here given their vast experience of both government and business.

In the meantime I reckon the decision of our lawmakers to moan about an individual outcome of a broader system rather than changing the system is already inane to the point of being counter-productive. I mean at least yer old skool Tory knew that to keep taking the piss out us plebs you had to give a little and not do it so fucking obviously.

So in the absence of any meaningful paternalistic gestures here are a couple of suggestions to start the ball rolling. First, draw out the practical lessons from Andy Haldane’s analysis of finance sector pay, most obviously the linkage between it and ROE, and start drawing up regulations that apply them as widely as possible. Also, control for company size in setting executive pay more generally so rewards reflect actual performance.

Second, change the law so that companies can only have one redundancy policy i.e. no more individually negotiated employment contracts for senior and or high earner bods that contain golden parachutes. I’m quite proud of this one cos I thunk it up by myself. Obviously, compromise agreements would be a way round it, so all compromise agreements involving over say £100k should be subject to independent audit to ensure they’re “real” rather than attempts to get round any one size fits all policies.

There. And see what I did with the random examples? Did you? Yeah that's right I was illustrating how cunt professional politicians have a very practical vested interest in preserving the status quo.

Grrr! Executive pay. Grrrr!

The thing that’s so cool about Sir Shred is how him being such a cunt lets dicksplash politicians pretend they're actually doing something by going on about how ghastly he is, being seen to be doing something being the raison d’etre of the political class. Even better doing so personalises what is a global macroeconomic crisis in line with the mainstream news's fixation with personalities as opposed to dull Reithian crud like educating and informing.

You'd have thought though that the obvious political lesson of the Sir Shred pension debacle was that as politicians couldn’t do anything about it, they should've shut the fuck up and instead concentrated on things they actually could influence. Except that was/is too hard. So instead they chose to avoid dull stuff like ensuring a proper enquiry was held into RBS complete with proper investigations so as to ensure the cunt was legally hung out to dry.

Unfortunately, personality politics clearly remains too appealling, so rather than anything that's actually serious we're still left with politicians a) identifying a specifc individual to be demonised, then b) going on and on about his cash so as to distract from the vacuity of taking such a “political” stance as opposed to doing or coming up with anything that actually matters a fuck. Hence we've Ed Miliband trying to outdo Esther Rantzen as a consumer champion by stating “David Cameron should act to stop Stephen Hester (the current RBS CEO) being paid a bonus of this scale” and Vince – the tit – Cable rolling out a raft of bollocks to supposedly curb executive excess.

Now before going any further it’s worth being clear about Stephen Hester the man who inherited Sir Shred’s utter fucking disaster. See the important bit there? That's right, Stephen Hester had fuck all to do with creating the RBS disaster and is working through it to make as much money as he can for the taxpayer. Some of the chat I’ve also heard is that he doesn’t like financing aircraft largely on point of principle, but that aside he didn’t cause the RBS catastrophe. In fact I mind hearing him, when he was still British Land's CEO, speaking at a property investment shindig a few years back. There, in my view, he provided a superbly realistic and succinct assessment of the UK commercial property market’s prospects. By contrast at the same conference useless auld Martin Wolf’s economic commentary dismissed the then emerging sub-prime crisis as something very unlikely to affect the global economy (the irony here being Martin Wolf subsequently sat on the ICB, whose recommendations RBS is now in the process of implementing). But, in politico land that kind of practical shite doesn’t matter. Much better to go on and on and on (and on) about fat cat banker bonuses etc., and how they shouldn’t be paid.

Except, actually howz about these apples instead, like howzabout a review of current tax arrangements with a view to using the tax system to address the growth seen in economic inequality over the past few years cos that kidna works elsewhere? You know, howzabout mad shit like looking at current taxes on wealth including all capital gains as opposed to how much people earn. Mebbe we could consider introducing differentiated taxes on consumption that take into account the nature and price of the good (relative to comparable items) being bought, like say 5% extra on an Aston martin as opposed to a Kia. And can we really go for tax “efficient” individuals and corporations, like REALLY go for them regardless of how many good lunches they take tax inspectors out for.

There you go. Oops, sorry, that’s too complicated isn’t it? Sorry. Much better to posture like Ed Miliband or come out with utter shite like Vincey boy who’s just issued the following on executive pay:

“Measures proposed include:
• making firms' remuneration reports easier to understand, and requiring them to explain executive salaries in relation to the earnings of other employees (Piece of piss really, “it’s a global market for labour at that level and don’t you know Americans earn far more for doing similar jobs” ya de ya de yada for christ sake please ignore nation specific differentials in top CEO pay)

• increasing transparency by requiring the publication of all directors' salaries (And? No seriously, fucking and?)

• giving shareholders a binding vote on executive pay, notice periods and exit packages - at present their say is merely advisory (as many people have already said asking fund managers to interfere in shit like that is like asking crafty turkeys to vote for Christmas. They won’t and don’t give a fuck anyway cos its only ever a tiny % of a company's revenues/cashflow. Plus they've largely bought into the CEO cult of personality shite so are only bothered with who the CEO is not what he’s paid. As for the Cairn chat, please bear in mind exceptions prove rules, single swallows don't make summers, etc.,)

• encouraging a wider range of people onto company boards, including academics, lawyers, public servants and those who have never served on a board before (Hearing shite like this reminds me of that story about Volkswagon and how they set up a slush fund to provide the trade union reps who sat on company boards with free whores, shopping trips and Viagra. Or rather than buying people off you could simply appoint token idiots. Cetainly, Jeffrey Sachs doesn't appear to impressed with Dambisa Moyo the black woman on the Barclays board)

• requiring all companies to introduce "clawback" policies, allowing them to recoup bonuses in cases where they are later shown to be unwarranted (nah, fair dos that is a goody)”

So yeah, the bollocks we’ve got at the moment is written in wholly cretinous terms as dictated by the media. It doesn’t address fundamental issues like the morality of how the people that fucked shit up for the rest of us are still doing very-OK right now thank you very much and it appears when confronted with shit like the growing disparity of wealth (wealth being different to income), the only response we get is don't pay him a big bonus, don't pay hin a big bonus i.e. a focus on incomes and contractual stuff that can't actually be touched as the Daily Mash spelled out superbly today in a manner I'm guessing is already influencing broadsheet commentary on the stupidity of what's being said.

Like when you think about it you start wondering whether all politicians, either through chance or design, are actually in a give-me-a-highly-paid role-as-a-senior advisor-when-I-leave-parliament cahoots with the cunts intent on fucking us all. I mean the "analysis" and crud being spewed right now is so wide of the mark in its stupidity its got poor sods like me actually presenting what could be construed as partial defences of multi-million pound banker pay packages its that bad.

In the meantime back at the Daily Mash you've got the statement they made about Ed Miliband being a “fucking child” and are left wondering how broadly applicable that is when it comes to assessing the political class’s grasp of what’s actually going on.

Like to give a serious example, why the fuck has Andy Haldane’s utter destruction of using ROE as a measure of bank executive performance no even got a mention yet by any mainstream politicians? Or more broadly should the longstanding association between executive pay and company size i.e. the bigger the company the bigger the wage regardless almost of performance, not be controlled for when setting exec pay? Oops that's too complicated isn't it. Sorry 2x.