If you are new to this blog, you are invited to read first “The Largest Heist in History” which was accepted as evidence and published by the British Parliament, House of Commons, Treasury Committee.

"It is typically characterised by strong, compelling, logic. I loosely use the term 'pyramid selling' to describe the activities of the City but you explain in crystal clear terms why this is so." commented Dr Vincent Cable MP to the author.

This blog demonstrates that:

- the financial system was turned into a pyramid scheme in a technical, legal sense (not just proverbial);

- the current crisis was easily predictable (without any benefit of hindsight) by any competent financier, i.e. with rudimentary knowledge of mathematics, hence avoidable.

It is up to readers to draw their own conclusions. Whether this crisis is a result of a conspiracy to defraud taxpayers, or a massive negligence, or it is just a misfortune, or maybe a Swedish count, Axel Oxenstierna, was right when he said to his son in the 17th century: "Do you not know, my son, with how little wisdom the world is governed?".

Sunday, 26 February 2012

City top talent


For all those who missed the table compiled by Patterson Associates and published in the paper edition of The Evening Standard on 22 February 2012, here it is:

Value added to the company per £1 in chief executive pay, 2006 - 2010:
SAB Miller:£21,950
Reckitt Benckiser:£11,958
Diageo:£9,199
Rolls-Royce:£5,182
Tesco:£1,028
BAE Systems:-£558
Legal & General:-£3,495
Barclays Bank:-£10,787
Royal Bank of Scotland:-£34,275
Source: Patterson Associates

The table shows the relationship between the notion of "the top City talent" and the skills and abilities to make/lose money for the investors/shareholders. No wonder pension funds, saving rates, endowments' returns are what they are. Any surprise?

For all those who follow "the City top talents" views on the current financial crisis and their depth of understanding, like Mr John Varley analytical view on this crisis (for example published on this blog) the figures in this table should look as expected.

It is likely that curbing City pay would give it a competitive advantage because now top pay in the City appears to attract top talent, but of the wrong sort.

5 comments:

  1. The answer seems to be to increase the chief executives pay substantially at RBS. An Extra Zero on the end should do it. Then the loss per pound spent on his pay would be smaller.

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  2. Yes Chris - I had a similar thought - you know it makes sense!!!

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  3. Hi Chris and RetiredDave

    ...shhhhhh... wait how long it will take to work that out for the banks' directors. If you use this measure if you are on the red (losses or depreciation of value, etc) the more you earn the less money you lose for a pound earned. But surely "City top talent" cannot really work out that:-)

    Best, Greg

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  4. This is a problem that (in mathematical terms) only exits in the positive numbers domain. The larger the profits you make for your company the higher the bonus/pay... and that's ok. That table becomes incorrect/irrelevant to the "Value added to the company per £1 in chief executive pay" proposition when the chief executive is making losses. The important word here is "added". Your head will hurt as soon as you start relating losses to this proposition. You can not! Losses simply do not make any sense here.
    It seems to me that "loss" does not exist in bankers' remuneration policies either. Let's wait for a bank director's comment here... but I fear the director's still dealing with his headache (assuming he/she started thinking about it)!

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    ReplyDelete