Should a banker forgo his bonus ?

Its not that I've suddenly gone soft on bankers but, the historical progression of this story, as ever, beggars belief.

In the dark days of the banking collapse of 2008 (seems like we've been in one crisis or another ever since), the Royal Bank of Scotland (RBS) got into serious difficulties. The bank announced eye-watering losses of £28 billion, a UK corporate record. This was put down to a case of overwhelming greed.

Rather than leave market forces to decide the price of such abject failure, the then Labour government in the UK decided to intervene. As a result, the UK Government (strictly speaking the treasury, through a vehicle called UK Financial Investments Ltd) became interested in 84% of the share capital of RBS, obviously leaving it as, by far, the largest shareholder.

In order for the bank to retain a listing on the London Stock Exchange, the voting rights attached to those shares were unilaterally diluted to 75%. There was no financial consideration for this action; very much an affront to the UK taxpayer. Very much a case of government intervention caused by panic, and reality being something for 'the rest of us'.

The then CEO, Sir Fred Goodwin, was forced to stand down, having been deemed responsible for the bank's predicament. He left with a golden parachute including a pension of £703,000 per annum. There was uproar at the amounts, and the story was on the front page for weeks. In the end a compromise agreement was reached of a pension (payable immediately to this 50 year-old) of £555,000 per annum, after having also received a, tax free, (another kick in the teeth for taxpayers) one-off lump sum of £2.7 million.

And for those of you who were wondering how plain Fred Goodwin turned into a 'Sir'; he was knighted by Labour prime minister Tony Blair in 2004 for... this is worth the wait... 'services to banking'. Laughable, tragic, inept, or maybe something altogether more nefarious.

A new chief executive was sought to replace Fred the Shred (a sobriquet earned as a result of merciless axe wielding at take-over time). The lot fell on Stephen Hester who was brought in from outside RBS; hardly a surprise as the performance of the previous incumbents, as a group, hardly warranted internal promotion.

Just, for one moment, let's assume that the government was instrumental (or at very least deeply involved) in this appointment. If it had not been at least consulted then, its cavalier attitude towards the taxpayers' money would have bordered on the criminal. So, let's take it as read then that the, then, Labour government appointed, or at very least rubber stamped the appointment of the new CEO.

I don't know about you reading this but, whenever I have been involved in hiring someone, the matter of compensation (it used to be called pay and conditions but, there's progress for you), was discussed before anyone signed any contract. We are therefore back to a government and majority shareholder not having a clue of the real world.

That's the background filled in, now fast forward to now. The Labour party (now, not surprisingly, in opposition) has 'threatened' a debate on whether or not Stephen Hester should receive his near £1 million bonus. Mr Hester has taken the path of least resistance and refused his bonus, not wishing to be branded a banking pariah.

So, I genuinely feel sorry for Mr Hester. He has, presumably, met the terms of his contract and his employers (as represented by the majority shareholder) are threatening a public execution.

The current Labour MPs (many of whom were in the previous government), should now do the decent thing and forgo all their pay and expenses.