Let's get this right.
The government thinks the EU bonus cap is barking mad because its imposition will heighten financial instability. Banks will merely whack up base salaries, thereby inflating their fixed costs and creating bigger risks, especially during a crisis. This analysis is shared by the Bank of England. And the government feels so strongly that it is fighting the cap in the European courts.
Yet at Royal Bank of Scotland – one of the less stable pieces in the UK's banking firmament – the Treasury will use its 81% shareholding to impose the bonus cap in its strongest form. RBS has been told that, unlike every other major bank in the EU, it can't pay bonuses worth 200% of salary. It will have to manage with a 100% maximum. The government's position is perverse.
Piling inconsistency upon inconsistency, the Treasury is happy to give Lloyds, the other partly state-owned big bank, the authority to award 200% bonuses. This plot is truly wacky.
Attempting to square the circle, the Treasury offers the explanation that Lloyds is out of the emergency ward. The state's stake has been cut to 25%, thus Lloyds should be allowed to behave like "all other majority privately owned banks". But this argument makes no sense either. RBS, according to the official script, is meant to be managed on private sector principles so it can return to private ownership one day.
True, George Osborne meddled in RBS's strategy to force it to concentrate on the UK – that was one reason why Stephen Hester was eased out as chief executive last year. But this government, like the previous Labour one, has shown zero interest in a full takeover of RBS to make it properly state-directed.
Instead, it has maintained the fiction that UK Financial Investments sits between the Treasury and the bank as an adviser-cum-buffer zone. In this case, UKFI advised allowing 200% bonuses (or, at least, abstaining on the vote) but Osborne did the opposite.
What happened? Naked politics – again. It looks as if the chancellor couldn't bear a headline that read: "Government gives green light for mega bonuses at loss-making RBS."
Good for him, many may say, finally someone's getting tough. Well, yes, everybody knows pay in big banking is absurdly high – even the Barclays board says it is sympathetic on that score. But the inevitable consequence of the Treasury decision is that RBS will crank up fixed pay. To get the ball rolling, Hester's successor, Ross McEwan, has been given a £1m "allowance" on top of his £1m salary.
Adding a final twist to the political intrigue, the Treasury made its decision at the eleventh hour. For at least two months, the unchallenged assumption had been that the government would abstain at both Lloyds and RBS if the banks asked for authority to award 200% bonuses.
RBS clearly had that impression. In Friday's pay report, Penny Hughes, chair of the pay committee, said RBS would be guided by "emerging market practice" in deciding whether to seek authority for 200% bonuses. Osborne rendered that line redundant. Hughes and colleagues were wasting their time consulting with non-government shareholders.
In the end, one suspects, RBS will find a way to rub along under a 100% regime. But the Treasury's move smacks of politics on the hoof. RBS has been culpable on pay and bonuses many times in the past, but on this occasion sympathy lies with the board. It is dealing with a weak government that says one thing and does another. Is there an election soon?
Pay policy tops the agenda
In other pay news, it turns out there are companies even more unpopular than Barclays. The bank scored a 34% rebellion against its pay report, but the revolt at AstraZeneca was 40% on the same day. The revulsion at BP was 32% the other week and Pearson, the FT publisher, clocked 37% yesterday.
Has the (badly named) shareholder spring of 2012 finally turned to summer? Not exactly. The figures above relate to the old-style advisory votes on companies' reports on remuneration for the past year. For the average fund manager, perhaps anxious to avoid the stern gaze of the business secretary, Vince Cable, it is easy to express disapproval when nothing hangs on the result. Instead the vote that matters these days is the binding version on future pay policy.
This vote was introduced – sensibly – by Cable at the start of this year. But rebels' spirits tend to flag when the voting gets serious. Barclays scored 93% approval on the binding vote. Sir John Sunderland, head of its pay committee, was even re-elected with a traditional Mugabe-style majority of 96%.
The exception on the list is AstraZeneca, where 31% failed to back the pay policy on the binding vote. That's a proper revolt. It is also a level at which John Varley, the ex-Barclays boss who chairs the AstraZeneca pay committee, ought to consider his position. "We are disappointed with [the] vote and it is our priority to carefully analyse it and talk to our shareholders to fully understand any concerns," says the company. In other words, it didn't see it coming. Isn't that meant to be Varley's job?
Mind you, there is more that passes AstraZeneca's understanding, like the fact that 43% of votes were cast against the re-election of non-executive director Jean-Philippe Courtois. "We will absolutely seek to understand the concerns that may be behind the vote," comes the same refrain.
Call off the detectives, there's no mystery here. Courtois was a no-show at four out of 11 board meetings and missed one session of the audit committee. AstraZeneca says its "highly valued" board member "provided detailed input in advance" when he couldn't attend. But the revolting shareholders clearly think that, when he is being paid fees of £95,000 for a part-time gig, Courtois should actually turn up for school. It's a reasonable view.
The problem with making money in investment banking
But Barclays shareholders still have the best lines. This year's winner: "We are paying for Manchester United but we are getting Colchester United."
Yes, that's the problem with making money in investment banking. Everybody wants to play in the Champions League with Goldman Sachs but places are limited. Thus everybody pays superstar wages even to lowly squad players. What's wrong with mid-table respectability if it offers more stability?
As beleaguered Barclays boss Antony Jenkins scratches around for ways to stay in investment banking, he should take the hint. Pitch Barclays as the antidote to Goldman and JP Morgan. Be an irritant to the fat establishment. Play ugly.
When insurer RSA agrees to pay scandalous underwriting fees of £25m on a zero-risk rights issue, make it a better offer; if its board declines, embarrass it by going public. Get a youth policy, so you don't have to throw zillions at your bond traders when JP Morgan taps them up.
Colchester United (no offence) may not be the right model. But would life as, say, Hull City – mid-table, tightly managed and in the Cup Final – really be so bad?
Is there a spot of bother over at Burberry?
Who will be chief executive of Burberry this time next week? Tim Cook, chief executive of Apple, thinks he knows: it won't be current boss Angela Ahrendts as he has hired her as his new retail supremo and he expects her to start work next week. That's what he said on Wednesday.
Strangely, though, Burberry can't bring itself to confirm that Ahrendts' handover to Christopher Bailey, first announced last October, is as good as complete. Normal form is to announce a chief executive's date of departure as soon as the detail is decided.
Is there a problem? Ahrendts is due an £8m bonus in June. Are the two companies squabbling over who should pick up the tab? Or is Burberry merely miffed that Cook named the day before it could? One suspects it's the latter – in which case, Burberry shouldn't be so sulky.
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