This was the week in which both the former CEO of Royal Bank of Scotland and the man brought in to mend the broken bank were both punished.
Sir Fred 'the shred' Goodwin was stripped of his knighthood to become plain old Fred Goodwin and his successor, Stephen Hester, was forced to give up on his annual bonus of nearly £1m in shares after a public outcry, mostly, it has to be said, among politicians who seemed extremely reluctant to let the issue go.
So there's an irony. While Goodwin is widely accepted as the man who drove the disastrous strategy that nearly destroyed the bank, Hester is widely held to have done a pretty good job, along with his other executives, of fixing things, the share price aside. Hester's bonus was, of course, the bonus contractually agreed when he took on the onerous job. Somehow, without actually breaking with his contract, politicians have forced him into giving up on part of it. The prime minister played his own part in this but simply withholding his backing for the man.
Goodwin's treatment comes nearly fours years after he departed RBS and was forced to give up on some of his pension entitlements. It is puzzling why the knighthood issue should reach its climax now, so long after the main event. It seems that politicians had lost touch with public opinion and suddenly found they had to move sharpish to get ahead again. For all intents and purposes, whether deserved or undeserved, the timing inevitably made it look like political expediency. And one wonders how much longer politicians can drag Goodwin out for a public thrashing. Perhaps, for as long as we feel the effects of the crisis Goodwin will be the handy bete noire to be wheeled out each time politicians need a legitimate victim for some enthusiastic corporal punishment. Goodwin is our chosen whipping boy whose fate is to provide a focus for our pubic anger and need for action.
But the treatment of Hester and Goodwin perhaps signals something else. The realignment of the relationship between politics and the City, possibly big business in general. We saw this last year when politicians finally found the ammunition to end their dependency on Rupert Murdoch and his media empire. Goodwin and Hester have become an extension of that effort. This week the politicians pushed back on symbols of the financial crisis in a visceral way. Hurting Goodwin and denying Hester was the articulation of a view that things were out of kilter, that politics has, for too long, had to woo business leaders who wielded power that had no public mandate and was borne out of their ability, and propensity, to generate vast profits and, of course, support the Treasury through not insignificant tax contributions. This week politicians regained a degree of control they have not, perhaps, enjoyed since the Big Bang deregulation in 1986. Until then the City needed politicians. But the relationship flipped. Gordon Brown and Tony Blair understood that only too well. And that's why they gave the City a New Labour cuddle. Coseying up helped write a narrative that legitimised the City and its profit driven values, as long it helped strengthen the Treasury's coffers for redistribution later.
What will be interesting to see is if this is a watershed in which that relationship goes through some lasting change. Business leaders in the City will no doubt be pondering that question too. When faced with the next big piece of onerous regulation, what leverage will the City have with emboldened politicians who might be feeling they now have the upper hand? Which government minister would want to be reported dining with City giants, winning over the masters of the Universe, in the current political landscape? Cameron's recent veto (if, indeed, it was that) of a European fiscal pact was cloaked in a justification for protecting the City, and yet, in now seems it was coloured by an opportunistic effort to appease his own euro sceptic party. Politics, whether high or low, trumps business.
Where public opinion goes politicians are bound to follow and the moments the public wants City financiers in the stocks. It would be reasonable to speculated that there are businessmen out there who this week vowed never to get close to government themselves. The capriciousness built in to the treatment of Stephen Hester will be a warning. There are those that will now wonder whether politicians would ever have your back when things get tight. If public opinion shifts, so will your business partners. The foundation element of business, the contract, was shown to have stood for very little indeed.
Of course, it was perhaps naive to agree that Hester should have a big bonus when he was signed on. That bonus though, would have looked modest at the time, and a necessary part of getting a big hitter into a tough job. But reneging (there's a strong word) on that deal will raise questions of trust bringing damage to government/City relationships for some time to come.
That said the suspicion must be that the balance of this relationship cannot permanently change unless the influence of the City were also to be permanently reduced. Its contribution to government revenues and the involvement of so many City figures in politics would suggest that this will be a temporary state of affairs. More's the pity, manufacturers might say. An economy and government more focused on producers would be a warmly welcomed development. Let's see where this particular story runs.
