It’s a relief that even a City investor group (PIRC) is now challenging the accounts of Barclays, RBS, and HSBC, initially when the pay deal for Bob (greedy as Croesus) Diamond is put to the Barclays AGM in a fortnight’s time. It is proposed to pay him £17m, largely made up of an executive share award (£7.8m) and a share bonus (£2.7m) on top of £3.7m payments under a 2008 share scheme plus another £1m under another 2008 share scheme.
Assuming he doesn’t spend his £17m all at once, that’s £327,000 a week. In addition, he’s also already promised a further £2.35m next month under another performance scheme, plus another £6.75m share pay-out in 3 years time ‘according to performance’. But despite this munificence, what has caused the hoo-ha in the City is two other matters.
One is that his £5.7m tax bill has been paid by the bank rather than by himself, thus reducing the return for shareholders and tax receipts for the Exchequer. The other is that PIRC argues that the accounting rules have been breached by the banks so that they do not provide a ‘true and fair view’ of the banks’ assets as required under the Companies Act. Thus they over-value loans compared with a realistic assessment of what they might get back, omit some bonus payments, and benefit from changes in the price of their own debt.
But that is still not asking the real questions that matter most. On what basis of performance are all these huge share payouts based? Who independently checked at the outset whether they offered a realistic and valid test of performance as against what might have been expected to happen anyway? What assessment was made of how far any improvement in performance could be properly attributed to the chief executive as opposed to other factors?
Nor have questions been asked about how far these carefully crafted schemes been devised as a means to reduce or eliminate tax? Tax avoidance has now become normalised at top corporate levels, almost legitimised as a duty to minimise tax liabilities even by the most artificial and fake means, when in reality it is the duty of all citizens to pay the tax due for which they are fairly liable as a contribution to society from which all gain. Yet tax avoidance/evasion has now become endemic.
The City of London has turned itself into a giant tax haven, passing much of its business through its subsidiary havens in British dependencies, overseas territories, and former colonies. Even HMRC admits that total tax unpaid over the last 5 years amounts to £193bn. And even Whitehall’s own top staff – the very people tasked to ensure that everyone else complies with the rules, have been found in at least 25 cases to have got their salaries siphoned through companies, in order greatly to reduce tax.