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Bonus outcry brings boardroom dilemma for No 10

Tory party funders are worried David Cameron is running scared or feeding the anti-business mood

No 10 and the Department of Transport will be breathing a sigh of relief that the bosses at Network Rail have decided to forgo their bonuses this year, instead handing the cash to badly needed rail safety improvements – even if in doing so they eloquently demonstrate the trade-off between private affluence and public squalor.

But David Cameron will be worrying that the mob of vengeful public opinion will now race through boardroom after boardroom demanding restraint each time the media or an Opposition politician alights on a juicy pay package.

Stephen Hester, the RBS chief executive, gave in last week, admitting he had misjudged the public mood. In the weeks ahead a host of bankers and semi-public sector executives in the regulated industries will face the court of public opinion as their pay packages are publicised, and scrutinised. Royal Mail, bankers, energy bosses, local authority chief executives, train operating companies, broadcasting organisations, airport chief executives, health trust chairmen, water bosses will all be anxiously talking to their human resources and PR departments to ask what pay levels will be acceptable.

Right-of-centre commentators detect an anti-profit mood. Tory funders are also anxious that Cameron is running scared, or even worse feeding the populist anti-business mood, coming perilously close to a national high incomes policy of the kind Labour governments used to impose on unions in the late 1970s. Michael Spencer, one of the top fundraisers for the Tories and chairman of Icap, the City broker, told the Sunday Times that the row that forced Hester to give up his £1m bonus sent a negative message to the business community. “I think the way Hester was effectively bullied out of his bonus was very negative indeed for the message it sends to the business community at large.”

It seems a long time since Britain’s executives, with some covert support in the Treasury were openly agitating for an end to the 50p top rate of tax. No 10 seemed to acknowledge its dilemma, stressing it was not going to comment on individual pay packages in the weeks ahead. At the same time, it sent out a message of general restraint, indicating very few generous pay packages are going to receive government support. Transport department officials were also anxious to underline how tough Justine Greening, the transport secretary, had been with Network Rail.

The prime minister’s spokesman said: “As a general rule clearly the prime minister is keen to see responsibility and restraint exercised by boards of companies whether they are in the private or public sector. All bits of the public sector should be reflecting on the financial environment and taking responsible decisions.”

The spokesman added the government did not want to see rewards for failure, and wanted to see shareholders take greater initiative. Yet in many cases the government is either the shareholder, the provider of subsidy or the author of the regulatory structure. In the case of Network Rail, since 2005 the government has not taken up the option of a seat on the remuneration committee, hardly an example of shareholder activism.

In some of its responses so far it is not clear if the government is opposed to large pay packages per se, or only large pay packages not justified by performance.

In a debate on Tuesday in the Commons called by Labour on banker’s bonuses, do not expect Labour to probe too deeply into the criteria that should apply to executive pay.

It will make a general point about the need to stop rewards for failure, call for greater transparency on pay and then propose workers on remuneration committees. Labour knows it scored points on Hester last week, but cannot afford to be seen as anti-business. But it will be a brave Conservative politician in the current climate that gets up to defend business. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds