Royal Bank of Scotland yesterday launched a concerted fightback against the mounting outrage over its decision to spend £785m on bonuses despite reporting a £2bn loss – almost double the previous year's figure.And it quotes the bank's chief executive Stephen Hester:
"The noise around RBS is damaging to the prospect of achieving the goals everyone needs of it. So far in the latest three years we have overcome that noise, and we will try to keep doing that, but no one should be under any illusions that you can't have your cake and eat it."In other words, Hester is convinced that he is right about everything and that any attempt to question his judgement is therefore bound to be harmful.
Does that remind you of anyone? A former chief executive of RBS perhaps?
In a blog post written three years ago and entitled Macho management is irrational and inefficient, I quoted a Times article about a familiar figure...
Goodwin, nicknamed “Fred the Shred” for his brutal cost-cutting, was an autocratic and fearsomely controlling boss. He even set dress rules for fellow executives that included wearing ties with RBS logos.
At Goodwin’s “morning prayers”, where he delivered decisions and rarely accepted dissent, he pursued an ambitious expansion strategy.I'm sure Goodwin had harsh things to say about "noise" too. And the same post quoted Alex Brummer on Adam Applegarth, the former head of Northern Rock, the building society turned bank whose collapse was the first sign to the public of things to come:
He had a reputation as a martinet who was difficult to challenge.
An insider said: 'He had an iron grip on the company. Any alternative plan or idea was rejected by those close to him on the basis that "Adam wouldn't like it".' There was no feedback. He surrounded himself with 'yes men' and Northern Rock ended up with people in senior positions who were not fit for purpose.
The company raced on, brushing aside worries about rising interest rates (which might leave its customers unable to pay their monthly mortgage) and a faltering housing market (which could drop them into negative equity). Applegarth rode roughshod over the bank's board of directors, who lacked the confidence or ability to call a halt to this imprudent expansion.My point is not that Hester is a ludicrous incompetent like Goodwin or Applegarth. It is that if we behave as he demands and refrain from questioning his decisions, there will be no way of finding out if he is until he is.
You could say that Hester has failed to take into account that he is effectively working in the public sector. Certainly, he would have been less likely to be bundled out of accepting his bonus if he had been working for a private company.
But if the banking collapse has taught us anything it is that all banks are ultimately underwritten by the taxpayers. Therefore we should all take a close interest in the decisions of their chief executives. We may have to pay for them one day.