Imagine how investment banking would work if not just board level people and a token handful of the highest earners had their pay disclosed, but everyone did, at least in any rump of an organisation where the taxpayer might ultimately foot the bill if things go wrong.
At every bank, everyone would know what everyone else made, and so would their clients and competitors, not to mention their spouses, neighbours, even the people they play golf with. In fact anyone with access to the internet could find out everything – base salary, bonus, deferred comp, pensions, you name it.
In certain walks of life, most notably the public services, pay scales and related matters are a matter of public record. There are no secrets about levels of compensation. For the most senior people, even gifts and hospitality are disclosed for us to pore over. It goes with the territory and they live with it.
In sharp contrast, investment banks are wary of transparency. After all, clients might baulk at our fees if they could type an enquiry into a search engine and find out just how much more than them their bankers take home.
It would be even worse if it was retrospective, let’s say going back to the start of the bail-out. At the golf club the usual decorum would be swept aside as non-City folk realise quite how good a thing we’ve been on these past years. In fact especially these past years – who would have thought how brazenly base salaries would be raised in the face of real or perceived fears of bonus caps? Or how shareholders would be stiffed (again) to pay the bonus tax? And all of that in an industry that had failed catastrophically and more or less bankrupted itself. Some people might feel quite indignant about that.
Internally the challenges would be just as great. Publication of hard numbers would mean managers had to manage. No more patronising nonsense about how well you’re doing and how good things are looking for next year. If at bonus time you could see exactly how well you – and everyone else – had been treated across the entire firm, the chances are that the scales would fall from your eyes.
Managers would certainly have to take some tough decisions. But isn’t that what managers are for?
Call me simple-minded, but I can’t help feeling that an industry with few friends, in dire need of rehabilitation, should be prepared to step into the spotlight and fess up to how it runs itself. And nothing is more fundamental than pay.