Sunday, 29 January 2012

Just leave Stephen Hester to shovel his shit

We give the man nothing but a pile of shit and a shovel and then complain, when he hasn't turned it into gold. I think he has been doing a lot of shovelling and not a bad job. Is it the appropriate amount, I don't know, but surely the people who should be penalised, if anybody, are the ones who hired him on terms we now don't like.

Anyway let's just consider what 'success' looks like. Basically the current targets are linked to share prices because that will provide an exit for the government, something that both government and banks are keen to see. BUT that doesn't mean long term improvement in cost to income ratios (profitability), it simply mean shares went up. But isn't that the same thing? No, certainly not.

With some simple accounting gymnastics you can for example make 2011 look a little worse than it is in order to make 2012 or 13 look a bit better than it is. Markets react strongly to both examples. Hopefully just enough to get over that threshold, so that you can collect your bonus and get rid of UKFI (the government).

I don't trade, I don't gamble, I don't even lotto, my brain cant handle the stress, but if I did, I would be keeping my eye on the above.

The thing to look out for is excessive loss provisioning (putting money aside for a loss that hasn't incurred and according to my theory wont incur) in 2011. Those banks might have a surprise for you in the next annual report.

So just leave Stephen to shovel his shit, reward him for that.

3 comments:

  1. I find it fascinating that we complain so much about bankers money, what about footballers and managers. Many of the so called 'Team Managers' wouldn't work for what Mr Hester is getting. You don't need as many skills to be in football, so I think its time we all had a go at the footballers for a while.

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    1. I can understand why some people would find the salary gap between the regular employee and the chief executive too great. The reality is that you need the best people for the most difficult jobs, and if you are to attract the best, you will have to pay them the market rate. I’m disgusted that politicians attack individuals in the press, people that they themselves have hired to do a job and now they ask them to “voluntarily” give up the compensation they are contractually entitled to. If the government want to change the pay policy, they can legislate and in cases where they are a majority shareholder they can exert direct control in the employment contracts, but they choose to use these bullying tactics instead.

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