PD James, the BBC, and bankers’ bonuses

The controversy over Banker’s bonuses continues to rumble on — I saw in the Evening Standard today that Boris Johnson, present Mayor of London, has decided to write to the heads of the banks expressing his surprise. (Gosh!)

Now obviously as staunch defender of the free-market I had found myself a little torn: I believe that bankers deserve to be compensated fairly at a rate determined by an independent market. Fortunately I happened to be digging around and stumbled across my notes from Baroness James’s wonderful evisceration of Mark Thompson, and I think I may well have found a way to reconcile my anger and disappointment at the Banks’ behaviour with my support of a strong financial sector and a free market. Initially the comparison may seem a little strange, I will grant you. But I think that it indicates wonderfully the myopic and clouded view at the top of both professions — and why we should reject their views as downright wrong and frankly untenable.

First, the BBC; and in fact the media more generally. Mark Thompson justified some of the outrageous salaries paid to various administrative and management professionals in particular by saying that he had to pay market rate to attract top talent. I won’t dispute that, but I would dispute his claim that what he is paying is a free market rate. You see, the BBC is the 500lb gorilla in this picture: it distorts the market away from optimal behaviour. It over-pays it’s middle to top management, a management now distorted and bloated beyond the size that any of it’s “competitors” are capable of supporting. It has the fringe benefits of one of the “attendant civil services” (as I have called them before): great benefits, weak management, great pensions, and of course the kudos of working with one of the world’s leading broadcasters. One of my friends works there in a junior, creative role (that is, she creates vital content for them). She took a pay-cut to take the job — not something any of her “superiors” did, I suspect.

But because of this distorting presence, other broadcasters in particular, and the media industry in general, have been forced to scramble to keep up. Salaries have had to rise enormously to attract BBC talent away from their jobs-for-life. The media world, particularly in these exalted circles, is small to the point of incest; “talent” circles round and round; their market value snowballs thanks to the incompatible pay and benefit structures. Put bluntly, the market which Mark Thompson tried to defend does not exist: it is a figment of his, and his predecessors and competitors, making.

On the other hand we have the banks. Now I’m not sure that, under the terms of their contracts and the conditions of the market when they were hired, that there were that many bankers who ended up receiving more than they were entitled to receive. In fact I suspect that many “earned” their bonuses over this past year. Conventional wisdom, interestingly most vocally expressed by senior bankers, is that again they have to pay a fair market rate in order to retain their “talent”. But again this is a spectacularly myopic and self-serving interpretation of the facts. Can I please take this opportunity to remind any bankers who may read this (not many I imagine) that banks-worth of your colleagues were laid off following the collapse of Lehman Brothers? These bankers, who would presumably quite like their old jobs back (albeit with suitably reduced salaries), offer quite the buyers market when it comes to acquiring talent. I know of a couple who would jump at the chance, understandably feeling that they were caught up in a problem well beyond their control.

This of course neatly side-steps the question of the bonuses themselves, and whether they were merited. Now in my line of work, as I imagine is true for everyone who is not a BBC manager or a banker and is still reading, bonuses are paid if you meet given targets: they are not guaranteed or ring-fenced (I don’t know, maybe I’m naive on this point?). So perhaps we shouldn’t even be calling these bonuses, or treating them as bonuses. Even if we do, and even if we do want to pretend that they deserve to be ring-fenced, I’m sure that they should only be paid if the institution in charge can afford it. Now last time I looked, the government owns RBS; and thanks to Gordon Brown’s and Alistair Darling’s chronic mismanagement of the economy they can no longer afford to pay these bonuses. And actually, when we say the government, we really mean you and me, and in fact everyone who pays taxes.

I’m not in a position to be able to judge whether or not these bankers have deserved their bonuses. And I’m not in a position to judge what the Managing Director of Paperclips at the BBC should earn. The problem is that the people at the tops of their respective professions, people who are incentivised to artificially inflate the value of their performance and that of their colleagues and competitors, are really the only ones who know; and in the banking and media worlds there are too few people at the top.

Fortunately in the case of the BBC there are a few external and independent people who can make this judgment: Baroness James is one, and her opinion was graphically clear. Mark Thompson would do well to listen and re-direct some of the ever-increasing license fee back into creating programmes. Hell, he doesn’t need to even achieve “success” in any real metric: in fact he is required to provide a certain percentage of “public interest” (or whatever it is called) TV; and despite what the “BBC Vision director” (or whatever her title is) implies, repeating is cheating in my book, especially with the existence of the iPlayer.

Similarly for the bankers we need someone to act as a Tsar; to perform a truly independent review of the market and lay down the law to the banks — our banks, no less. I have been trying to think who could do this … the danger is that anyone who the banks would accept would necessarily be tainted. Even Ken Clarke, for all his admirable qualities and relevant competencies, has too tight ties to the industry for it to be seemly.

Perhaps a frightfully senior judge, ideally a former Law Lord, might just fit the bill. Smart, independent, beholden to no-one, adept at analysing the finer points of extremely complicated arguments …

Oh dear. I think I may have just called for an independent judicial review. There must be a better way … over to you, my patient readers!