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Bankers’ bonuses – blame the ‘because I’m worth it’ generation | Christopher Bones

Lloyds may be clawing back bankers’ bonuses, but for 30 years top executives have been told they are an elite of perfect beings

According to the Edelman Trust Barometer 2012, 65% of us don’t trust business and 79% of us do not trust its leaders. The announcement that Lloyds Banking Group is to “claw back” bonuses from up to ten senior bankers because of the £3.2bn losses that the bailed-out bank suffered after the payouts were awarded last year is unlikely to change that. When I started out in business, it was more highly regarded than most other institutions in the country. While its demise parallels that of many other institutions, it is a tragedy for those of us who accept that the market will have to play the greatest role in rebuilding the wealth we need to support the public services, retirement support and social mobility that underpins a successful liberal democracy.

This is the legacy of a generation who dominated leadership positions in big business, in politics and the media over the last 30 years. A generation whose values were driven by a desire to be seen as successful: and embracing the trappings of success was at the core of their self-promotion. I call them the L’Oréal generation: they ramped up their pay, their power, their expenses and their self-importance because “they were worth it”.

What told them they were worth it in business were two beguiling propositions: the concept of leadership perfection – the intellectual equivalent of the Charles Atlas offer to six-stone weaklings – and that of a shortage of “leadership talent”. Leadership perfection comes from the Mary Poppins school of business, which argues that you can create leaders who are practically perfect in every way. Just about every leadership book written in the last 30 years comes from this standpoint and just about every performance appraisal reinforces it. Who doesn’t want all their competencies to be ranked “strong”?

In leadership, we have bought the fact that, like cosmetic products, we can work without blemish and have a positive outcome every time. This is the antithesis of reality and a denial of our own humanity: for none of us is without sin, even CEOs.

The “war for talent” was propounded by smart people at McKinsey in the 1990s. It argues that talent is finite and potential limited. Success would come by getting the very best and then paying them to stay, regardless of cost, as they would inevitably out-perform. Major adopters could be found in financial services, banking and, of course, that bastion of corporate propriety, Enron. Despite this, in business and public-sector organisations today there are still many believers: just look at the RBS board’s justification for the size of the pay packages at the top.

This thinking bolstered the L’Oréal generation into pushing for a greater and greater share of the profits in the enterprise as the power of the real owners of capital in businesses (you and me) declined, and that of fund managers with similar aspirations and bonus plans increased. Boards found investors sympathetic to accepting the inevitability of the Lake Wobegon effect: this is the tendency to rate all members of a group as above average. Derived from Garrison Keillor’s town where “all the women are strong, all the men are good-looking and all the children are above average”, this became the underpinning principle for CEO and top executive remuneration for the last 20 years.

I believe this has to change and that government can help by making remuneration report votes compulsory, and including a requirement to report earnings ratios across the business – allowing shareholders to see the scale of the inequality of rewards between the few and the many. Government messaging is heading in the right direction: it now needs to act.

Since I first argued this case, I have found more and more senior people in business in agreement. Even if they don’t support every solution I propose, they agree that it is a system failure and that change has to happen in many places. They know “good” business is good for business.

The endorsement of my argument as the UK’s Management Book of the Year in this context is not as surprising as it might seem. Most managers don’t get rewarded excessively – they work hard and are conscientious. I think this book speaks for the silent majority who believe that their leaders should stop looking after themselves and start looking after their customers, their shareholders and their communities. The real leaders will be those who curb their own excess first.

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