By Joe Mayes
Does your current career plan look something like this? Get a 2:1, get a job in the City, go into investment banking and then get rich quick? Pinstripes, London, the corporate world, prawn sandwiches and (most importantly) a big annual bonus?
Well it might be time to think again. Whilst a career in banking or finance might have been top of the list for a Durham graduate in years gone by, life in the City no longer looks so rosy. As Britain adjusts to its age of austerity, where real incomes are falling and unemployment is on the rise, public anger at the perceived excesses of capitalism and the supposed big bonus culture at its heart threatens the future of the City as we know it. Times are a-changin’.
Following last year’s Occupy movement, banker-bashing season is in full swing. First we saw Stephen Hester, the chief executive of the Royal Bank of Scotland (RBS), turning down his £1m bonus following pressure from the general public and the Labour party. Next came the de-knighting of Fred Goodwin, the man seen to have brought down RBS in 2008, this time with the backing of Prime Minister David Cameron and other party leaders. With public sentiment as strong as it is, politicians of all stripes have been lining up for a few cheap swipes at the City.
But can we expect this to continue? Is the big bonus culture well and truly on the way out? Can our Durham graduate kiss goodbye to his gold-plated job in the City? The signs would certainly appear ominous.
In one respect a rebalancing in the field of executive pay is well overdue. No-one can deny that something is going wrong when CEOs of major banks are receiving six-figure bonus packages whilst the share prices of these banks are sinking and stakeholders are suffering. In too many cases rewards don’t match performance. Such practices are unsustainable and the public have a right to be angry.
Others argue that we need to pay high salaries and bonuses in order to attract the best people for the job in order for us to get out of the economic downfall.
However, in the post-2008 political landscape the very idea of large executive pay and bonuses is under threat. The concept of ‘responsible capitalism’ is rapidly gaining credibility in both a moral and economic sense.
On the first count, one can feel a growing consensus that it is morally dubious to give someone a £1m bonus when that money could, for example, be used to employ 60 nurses. On the second count, there is the increasingly respected theory that excessive inequality is in fact one of the key reasons for the current economic malaise: too much wealth held in too few hands depresses consumer demand and thus overall economic activity and employment. A post-crisis capitalism might well be refashioned so as to reduce such inequality, meaning potential caps on executive pay or bigger taxes on bonuses.
All this is bad news for our Durham graduate. Whilst the City will nevertheless remain as Britain’s key economic engine and biggest sector of employment in the future, just don’t expect big bonus business as usual.