Rewarding failure..

Shareholders of course do not run businesses, they invest in, and own them. It is company directors that run the business on behalf of their shareholders, and within this arrangement is an implicit level of trust and responsibility that the directors - and particularly the CEO and other major office holders - will run the business in order to benefit their shareholders.

Interesting then to note that over the period since Bob Diamond became a director of Barclays bank plc in 2005, he has been paid nearly £100 million. That's quite a sum of money, and you would think for such rich rewards this man must have produced really prodigious returns for his shareholders. Unfortunately, you would be wrong. 

In the last five years the share price of Barclays plc has gone from over £7 per share to just £1.68 today - a fall of more than 75% in value for shareholders over that same period when their CEO was paid nearly £100 million.

That's what I call rewarding failure.. 

Moral Hazard

No need to revisit old arguments, but the Deborah Hargreaves piece in the guardian really grates. On Bob Diamond's appointment to head Barclays she writes:

Diamond's rise to the top is a remarkable endorsement of his risk-taking: lucrative investment-banking activities now account for more than 80% of Barclays' profits. It is also a sign of an industry's renewed confidence in its ability to take on the government and face down cries for banks to be broken up.

Its really simple. If you bail out bankers with taxpayers money you create Moral Hazard. Why on earth wouldn't they continue to operate as if nothings happened and pay themselves huge bonuses when they know any mistakes will be paid by the taxpayer?