City HR head warns against knee-jerk reaction on bonuses

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Bank bonuses should reflect the value of an individual to their organisation, not political rhetoric or historical context, the chairman of the City HR association has warned.

Robert Potter, who heads up the financial sector’s HR body, warned reward policy makers against knee-jerk reactions in the in the wake of the row over pay at RBS.

Labour leader Ed Miliband is among those calling for stricter government policy on executive pay following the episode, which saw RBS chief executive Stephen Hester refuse his bonus worth nearly £1m in bank shares after extreme pressure from the media and politicians.

But Potter said: “Just look at the contribution Hester has made, this man has been brought in to turn the bank around. He’s not the one who has created the problem, he’s the one who has on behalf of the people of England has taken on this huge responsibility. He has a huge job and a challenging task in front of him; I would think that the people of the UK would want to make sure that he is as motivated as possible to achieve the goals on their behalf as a shareholder.”

He added that any bonus award should be understood in terms of the value of Hester as an individual and the true value that he would bring in the long term to that organisation and to the City.

Bonus decisions should be made in this context rather than a historical one, or under the influence of political rhetoric that has built up, he added.

“Ultimately the people of the UK have the ability through Parliament to decide what type of society and economic environment that we have in this country,” said Potter.

“As such decisions are made, care needs to be given to understand the long term consequences. While no one appreciates circumstances where people are paid beyond their value, some of the current political rhetoric appears to no longer focus on value, the value of individuals and the true long term value that the City of London brings to the UK.”

Commenting on Miliband’s calls to change the corporate governance code to stamp down on bonuses, Potter said: “It’s for Ed Miliband to go to the people of the UK and ask whether that [tougher rules on bank bonus awards] is the mandate of the people of the UK and one that they wish to adopt

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