The Sunday Times, Uncategorized

March 1st, 2009

Send the filthy rich culture packing – with no pension

The filthy rich, as Peter Mandelson affectionately calls them, are different. It is not just that they’re rich but that there’s something about being extremely rich that blurs ordinary perspective in all but the most exceptional people. Power may corrupt, but extreme wealth blinds and deafens. One of the many glaring pieces of evidence for this, available in abundance these days, is the inability of Sir Fred Goodwin to see himself as others see him, or to see his astonishing payoff as others see it. Fred the Shred quite clearly does not feel any of his vast pension pot is undeserved, even though he presided over record losses at the Royal Bank of Scotland. He is not ashamed to demand huge sums of money, as of right, from taxpayers on low and modest incomes; he seems to feel they ought to reward his incompetence. Thoughts of shame or making amends don’t seem to enter his mind. He even feels he has made several sacrifices or “gestures” in his severance agreements, which squares it. In this, Goodwin displays the same plutocratic blindness as another top banker currently receiving unwelcome public attention – Eric Daniels, the chief executive of Lloyds, who, defending bonuses in front of the Commons Treasury committee last month, appeared to consider his annual salary of more than £1m as “modest”. When asked why banks such as Lloyds, rescued by the taxpayer, should pay any bonuses at all, he said that “the recipients of bonuses that I am referring to are people like you and me. They have relatively modest salaries”. Modest? Like you and me? Not. Like Goodwin, Daniels appears to have parted company with reality as most of us see it. I can well imagine that Daniels may have felt a bit peeved at times by the thought that there are lots of bankers and businessmen out there who are indeed paid hugely more than £1m a year. He must meet them constantly at smart parties and convocations of the great and the good in sunspots. It must be quite irritating. No doubt Goodwin, too, knows lots of people who can expect to retire on a great deal more than £693,000 a year; I don’t suppose that puts him near the top of the league at all. A man could almost feel hard done by under such circumstances. That is what happens when you are surrounded by people who get paid such enormous sums – when you live in the world of the filthy rich. I first came across the filthy rich just after I was married and went to live in Hong Kong in the 1970s. Leaving poverty-stricken Britain, my husband and I joined a gold rush of bankers and brokers to what was then still a crown colony. What we saw was wealth and conspicuous consumption beyond the wildest dreams of avarice. When I look back it seems like a dream – yachts and junks with boat boys, diamonds, gold, jade and bling, extravagant Chinese banquets, servants with bare feet and pigtails, pink and gold Mercedes, racing, gambling, water-skiing, jetting about and generally getting through loads of money because there was plenty more. Though we weren’t extremely highly paid, we spent a lot of time with people who were. Some were entrepreneurs and others were employees of banks and trading houses that, as today, offered them ways of making megabucks. Soon it became obvious that being very rich is like catching an insidious virus. Some people are able to resist it, but with most people the super-riches virus burrows into your nervous system for life. It blurs your perspective, weakens your grasp on reality and changes your identity into someone who is entitled to be very rich. When we left this vanity fair, gladly in my case, the man who took over my husband’s job there in a merchant bank was Paul Myners. Since his Hong Kong days he has been an outstandingly successful fund manager and nonexecutive director and has made a lot of money. He was advising the government on pensions in the private sector recently until he resigned to take ermine and become a minister. Lord Myners now finds himself in a spot of bother with Fred the Shred, though there has been no suggestion that he has acted improperly. It now seems that the precise terms of Goodwin’s huge pension pot payout must have slipped Myners’s attention when as City minister he was overseeing the government’s plans to take control of RBS last October. Myners okayed the terms on behalf of the government, and now explains that he was told by the then RBS chairman that the pension payoff was contractually binding. In fact that was wrong; the board of RBS had some discretion over it. However, Myners did not question this information. The glaring question is why not. He actually knows about pensions. The simple thought that immediately occurred to me – and it is only a theory – is that Myners wasn’t particularly struck by the size of Goodwin’s pension. It didn’t hit his radar as a glaring problem, financially or politically. Had Myners been instantly shocked by the size of it, he would no doubt have asked searching questions (he was once a Daily Telegraph journalist) and he would then have discovered that it was not legally binding on anyone to cough up the whole amount, at least not at that time. But, I suggest, this stonking pension might have struck Myners, in that world of stupendous salaries and bonuses that he knows, as more or less what a top chap might expect. I may be wrong, of course. But I do know things are done quite differently on the parallel planet inhabited by the filthy rich. Remuneration boards unselfconsciously award each other astonishing packages, wrapped up in euphemism. Recently, for instance, Bob Diamond, the highest-paid director on the board at Barclays, defended the bonus culture – Barclays was about to hand out £600m in bonuses to investment bankers – and said he doesn’t like to use the word “bonus”: “I prefer the phrase ‘incentive compensation’.” Compensation? What do these bankers think the word means? A consolation prize for a “relatively modest” salary? Diamond’s “compensation” for 2007 was, incidentally, £21m. The public loathing of Fred the Shred is a distraction encouraged by the government in its wish to bury other bad news along with Goodwin. But his downfall does make certain things clear. The filthy rich culture that has developed in the past 20 years is sick. It needs strong medicine, fresh air, open windows. Above all, what’s needed is a cold dose of fear – fear of failing, of being sacked and of losing the lovely money. Here is an excellent antidote to greed.