Why the Treasury won't illuminate 2010 bank pay
Over a 10-year period, the share price performance of Britain's banks has been appalling (in the case of Royal Bank of Scotland and Lloyds/HBOS) or lousy (Barclays and HSBC).
Over the same period (you probably won't need reminding) the remuneration of top bankers has soared, both for those who run the banks and for their star traders and advisers; the early part of this millennium was the period when the multi-million pound bonus package proliferated and became entrenched into the system.
As for dividends, after the crash of 2008 banks either eliminated them (RBS, Lloyds, Barclays) or slashed them (HSBC).
So it's been a great time to work for a bank, and simply the worst time to own shares in a bank. Which would look like prima facie evidence that the balance between rewards for bank employees and rewards for the owners have been skewed too far in favour of the employees.
That is bad news for those of us still brave enough to save for a pension, since there'll be a slug of bank shares in our portfolios (whether we asked for them or not).
So why on earth haven't the owners or those who manage big pension and insurance funds on behalf of the ultimate owners (that's us by the way) demanded more for themselves and insisted on less for those who destroyed the value of their (our) banks?
There is another facet to this puzzle. Research by the Bank of England shows that if banks reduced the proportion of their revenues that they pay out in pay and bonuses back to what it was in 2005 (which was a pretty good year for the banks), they would free up £10bn - which could be used to strengthen themselves by retaining it as capital (which is what the Bank of England and FSA would prefer) or to pay higher dividends.
To put it another way, the failure of the owners to insist that this £10bn be deployed to reinforce the foundations of their banks or provide an income to them is one of the great mysteries of our time.
The previous government spotted that when it came to setting pay, shareholders appeared to have abdicated all responsibility. So it took advice from a senior banker and former regulator, Sir David Walker, and decided to help the owners put pressure on banks that were paying too much, by forcing the banks to disclose much more detail about what they pay.
It prepared draft legislation that would have forced bankers to disclose every year how many of their people earned more than £500,000 but less than £1m, how many earned more than £1m but less than £1.5m, and so on, in bands of £500,000, until the threshold of £6m was breached, at which point the disclosure bands would have widened to £1m.
The legislation never made it on to the statute book, because the general election intervened. But both George Osborne, the Chancellor, and Vince Cable, the Business Secretary, always said they were in favour of improved disclosure of bankers' pay, so the widespread assumption was that the statutory instrument would become law in time for the pay information to be included in the banks' next annual reports.
That's not going to happen: the new law on executive remuneration in financial services has been shelved, as the prime minister confirmed during Prime Minister's Questions yesterday.
Why? Well, you probably won't need telling that those who run British banks have for some time been telling me how much they dreaded having to reveal how many of their people earn seven figures and above.
However, in defending the status quo, David Cameron pointed to a public change of heart by Sir David Walker, who earlier this week wrote in the Financial Times [registration required] that he didn't think it was appropriate for UK banks to be forced to disclose more information on what they pay than US banks, or French banks, and so on.
This is what Sir David said:
"[A]ny attempt to require banded disclosure for UK banks in isolation would be commercially sensitive vis à vis their non-disclosing competitors elsewhere. It could also stimulate higher executive turnover, and (as a perverse unintended consequence) lead to higher remuneration as a defensive retention measure."
You'll have to judge whether you think the potential competitive cost to British banks outweighs the potential benefits for the owners of banks in having the information that would enable them to engage in an informed dialogue with bank bosses on an aspect of management with profound consequences for the strength and sustainability of banks.
The Treasury says that Mr Osborne will write to European Union finance ministers, to press for a Europe-wide bank pay disclosure regime. It insists that a light may yet be shined on what bankers are paid.
We'll see. What however is as dead as any dead thing is the notion that British banks could be forced to lead global moves towards greater illumination of bankers' pay.