Crony Capitalism

Crony Capitalism is a particularly nasty aspect of the Capitalist system, whereby those in charge help themselves to vast amounts of the nation’s wealth regardless of their performance, simply because they can. As well as paying themselves huge salaries and bonuses, they ensure that their contracts have termination clauses which entitle them to huge payouts when they leave, even if they’re leaving because they’ve been dismissed for incompetence. Frequently these clauses entitle them to anything up to 3 years salary. Particularly unpleasant examples of this include:

RBS 1 cc
The Royal Bank of Scotland – being 80% owned by the government has done nothing to curb banking excess.
Picture © Nadia Isakova

The Royal Bank of Scotland: most people are by now familiar with the fact that Fred Goodwin*, having almost single-handedly destroyed RBS during the financial crisis, and forcing a £45bn tax-payer bailout, was still able to leave with a £17m pay-off. However the scandal doesn’t end there. It may now be 80% owned by the taxpayer, but that didn’t stop John Hourican*, who was forced to resign after the bank received a £400m fine for fiddling interest rates, still getting a £700,000 pay-off when he went. And even more, chief Executive Stephen Hester*, after struggling unsuccessfully to reverse the damage wrought by Fred Goodwin, finally gave up but still managed to leave with a £5.6m payoff.

At the Halifax Building Society James Crosby* was forced out due to failings there. He was legally entitled to £30,000/year on departure but managed to persuade the bank to give him £572,000/year. When this was made public he ‘generously’ offered to drop his entitlement to a mere £406,000/year.

File:Bob Diamond - World Economic Forum Annual Meeting 2012.jpg
Barclays’ Bob Diamond in Davos, 2012. Picture © World Economic Forum

Elsewhere, Bob Diamond* was forced to resign after a series of scandals at Barclays Bank but was given a £2m payoff. Jerry del Missier* also resigned from Barclays for the same reason but left with a £9m send-off package.

At G4S the chief exec, Nick Buckles*, was forced out after a series of failures, including the complete fiasco of providing security for the London Olympics which led to the British Army being called in. He  was none-the-less given a payoff and left £16m richer.

At Serco, the outsourcing specialist implicated in fraudulent government contracts, Chris Hyman* was forced to resign, but still took a £9m pay-off with him

Morrisons’ boss, Dalton Philips, was sacked for his poor performance at the high-street supermarket, but was still given a £3m payoff.*

Unfortunately the disease of Crony Capitalism has spread from the private sector to the public sector too, with bosses there demanding similar contracts, arguing they also deserve to be paid the ‘market rate’ (even though most ordinary public sector workers are forced to endure a pay-freeze in the name of Austerity):

In 2013 10 top civil servants left their jobs and got combined pay-offs of £4m, that’s £400,000 each. Included in this was George Entwhistle* at the BBC who worked a mere 54 days before being dismissed because of his poor handling of the Jimmy Saville affair. He still got £450,000 for those 54 days work.

The BBC – at the centre of several recent financial scandals. Picture © Panhard

Also at the BBC* it has recently come to light that over an 8-year period £396m has been given out in payoffs including £25m paid to 150 executives in the last 3 years. Top winners included BBC Worldwide Chief John Smith who was given £800,000, Deputy Director General Mark Byford who was given £949,000, Jana Bennet who got £687,000, and Chief Operating Officer Caroline Thompson who got £680,000. Most of these pay-offs were far in excess of guidelines or what the BBC was legally obliged to hand-over, and in many cases staff were paid twice, being given pay in lieu of notice and then also working out their notice period. Incidentally it’s worth remembering that if you fail to pay your TV Licence of £145 the BBC will come after you, and very likely prosecute you, but if you’re a top BBC exec and walk off with 100’s of thousands of £££’s that’s apparently fine.

File:David Nicholson 1.jpg
NHS Chief, David Nicholson.
Picture © NHS Confederation

The NHS* has also been embroiled in similar top-level cronyism. It has been caught out giving 50 top execs pay-offs of over £100,000 each, most of which it tried to keep secret. Three of those payoffs were of over £½ million, and to add insult to injury in each case the individual concerned never left the Health Service at all, but was immediately re-employed in another part of the NHS. (Sir Neil McKay*, who oversaw the disastrous privatisation of Hinchingbrooke hospital, was given a £465,000 payoff).  In all £92 million was wasted on redundancy payments to staff who were then re-hired.  NHS Chief David Nicholson*, who oversaw much of this, ended up leaving the NHS in disgrace, but not without a £1.9m payoff.

Most recently the disgraced head of the Southern Health Trust, Katrina Percy, left with a £190,000 payoff.*

At the Crown Prosecution Service* Mike Kennedy left with a £520,000 pay-off, and another unnamed executive was given a £623,000 pay-off.

At Historic Scotland, Chief Exec Ruth Parsons* was forced out following allegations of bullying. Despite having only been in the role 30 months, she was still allowed to take a £300,000 pay-off when she went, equivalent to 3 years salary. In 2013 a total of £18m in payoffs was made to Scottish Civil Servants*.

Even the Serious Fraud Office*, of all people, is now being investigated for making £1m of unauthorized payments to former staff.

File:Seva Mandir non-formal education center.jpg
Charities: Saving the children but paying themselves handsomely at the same time.
Picture © Givewell

Sadly, obscene pay has even reached the Charity Sector, where it has just been revealed that over 1,000 charity executives are on 6-figure salaries*, including the boss of Save the Children who gets £234,000 per year (£4,500 per week). Also, unbelievably, Jane Ashcroft, who is head of The Anchor Trust – a housing association for elderly people – is paid £420,000 per year (which compares to the average salary of her full-time employees of less than £20,000), while David Cowans of housing association Places for People is on over £480,000!* Now you know what all that money you donate is being spent on.

It should be noted that in all the above examples no rules have been breached and no laws have been broken, for the very simple reason that the people giving themselves pay-offs are also the ones who make the rules. Anyone who believes that the best way for capitalism to operate is to lift the regulations and give it as much freedom as possible, would do well to consider how that can possibly create a fair society, when what that actually means is that the thieves and the law enforcers become one and the same people.

* References:

Fred Goodwin: http://news.bbc.co.uk/1/hi/business/7921778.stm

John Hourican: http://www.dailymail.co.uk/news/article-2274171/John-Hourican-RBS-banker-step-Libor-rate-rigging-scandal.html

Stephen Hester: http://www.mirror.co.uk/money/city-news/rbs-chief-stephen-hester-leave-1948610

James Crosby: http://www.dailymail.co.uk/news/article-1147964/Failed-HBOS-chief-Sir-James-Crosby-home-pension-pay-572-000-year.html

Bob Diamond: http://news.sky.com/story/958339/bob-diamond-nets-2m-barclays-pay-off

Jerry del Missier: http://www.dailymail.co.uk/news/article-2179020/Jerry-del-Missier-Disgraced-Barclays-boss-quit-Libor-scandal-exits-9m-payoff.html

Nick Buckles: http://www.mirror.co.uk/money/city-news/g4s-boss-nick-buckles-walk-1901939

Chris Hyman: http://www.theguardian.com/business/2013/oct/25/serco-chief-quits-government-contracts-chris-hyman

Dalton Philips: http://www.cityam.com/217253/investors-revolt-over-morrisons-ex-chief-s-pay

George Entwhistle: http://www.bbc.co.uk/news/uk-20793496

BBC: http://www.theguardian.com/media/2013/dec/16/bbc-payoffs-damaged-reputation-mps-public-accounts-committee and http://www.bbc.co.uk/ariel/23960619 and http://www.dailymail.co.uk/news/article-2316278/BBC-executive-given-800-000-golden-goodbye-just-weeks-Lord-Hall-imposes-150-000-cap.html

NHS: http://www.telegraph.co.uk/news/nhs/12092461/NHS-paid-out-more-than-90-million-in-redundancy-to-staff-it-then-rehired.html and http://www.dailymail.co.uk/news/article-2547973/Three-NHS-bosses-share-1million-redundancy-payouts-new-jobs-health-service.html and http://www.bbc.co.uk/news/uk-england-37588815

Neil McKay: http://www.dailymail.co.uk/news/article-2937179/Stitch-hospital-report-riddled-200-errors-NHS-watchdog-behaved-like-used-car-dealer-run-lynch-mob-says-MP.html

David Nicholson: http://www.dailymail.co.uk/news/article-2328472/NHS-chief-dubbed-man-shame-quit-year-110-000-pension-But-STILL-apology-victims-Stafford-scandal.html

Crown Prosecution Service: http://www.telegraph.co.uk/news/uknews/law-and-order/10316638/Crown-Prosecution-Service-spends-more-than-1-million-on-pay-offs.html

Ruth Parsons: http://www.heraldscotland.com/news/home-news/300000-golden-goodbye-for-controversial-agency-chief.23086750

Scottish Civil Servants: http://www.heraldscotland.com/news/home-news/anger-over-18m-spent-on-payoffs-for-civil-servants.23139042

Serious Fraud Office: http://www.theguardian.com/law/2013/mar/15/fraud-office-chief-apology

Charities: http://www.thetimes.co.uk/tto/news/uk/article4643202.ece and http://www.dailymail.co.uk/news/article-2550648/Fury-234-000-salary-boss-Save-Children-Charity-chiefs-huge-wages-reined-say-MPs.html and http://www.thetimes.co.uk/tto/news/uk/article4417615.ece and http://www.thetimes.co.uk/tto/news/politics/article4554628.ece

Share:

One thought on “Crony Capitalism

  1. It is a rip off of everything no law no moral no food no hygiene it’s nazism with advertisement to justify this sort of new blindness and violence. New connections and new ratios global work cheap force. Low expectations and so on, hate and fear.

Leave a Reply

Your email address will not be published. Required fields are marked *