The Ford Bonus

Professor Tim Congdon was on the radio a few days ago taking a hard line against critics of British banks and in particular against Mervyn King, Governor of the Bank of England. Without rehashing Prof Congdon's specific points it's fair to say his general argument was that successful banking is about confidence and the more, therefore, that bankers are criticized, the less likely it is the banks (and their shareholders - don't forget the shareholders) will prosper. For this reason, Prof Cogdon said effectively that Mervyn should get back in his box and stop knocking the very people and institutions it was his business to protect and promote.

Many would consider Prof Congdon's argument to be too extreme - a view potentially reinforced by his view that the credit crisis was caused by politicians and not by bankers. (Actually I have some sympathy with this notion but this is really the result of a visceral dislike of politicians rather than a series of well-reasoned thoughts). But it is interesting in this regard that bonuses, for example the £9 million or so to be paid to Barclays' boss Bob Diamond, is front page news whereas other, larger payments, scrape onto the bottom of the inside pages.

Consider this example. Some three years ago, as the financial crisis began to take in the United Kingdom, the government of the day was forced to buy up majority holdings in Royal Bank of Scotland and Lloyds/Bank of Scotland. Barclays, which was in very nearly the same parlous state as the aforementioned, chose not to take government money (or at least British government money) and instead sold a chunk of equity to the Qataris (a chunk that I believe it has now bought back).

Recently, Barclays has returned to making exceptional profits and Bob Diamond has been roundly criticized in the media for being awarded his thumping great bonus.

Equally, some three years ago, as the financial crisis began to take hold in the USA, the government of the day was forced to buy up large slices of equity (or provide favourable loans) in two of the nation's leading car makers: GM and Chrysler. Ford, which was very nearly in the same parlous state, chose not to take government money and instead battled through its problems to the extent that the shareprice which in the depths of the crisis was down to about $1, is now at around $16 and its two leading lights, Alan Mulally and Bill Ford Jnr are to pocket $98 million in Ford shares as a performance related bonus.

And where is the media criticism there?

Yes, great bankers such as Diamond, make a lot of money - but so do successful executives in many fields of commercial endeavour.

So what?