STEPHEN HESTER – An Alternative View

I know this subject seems miles away from my normal area of expertise, but please have a look & let me know what you think.

I am so sickened by the whole Royal Bank of Scotland bonus debate. It is a small, almost irrelevant, part of a much larger and infinitely more important question which is that of the real responsibility of banking and bankers for the current global misery of recession.

I spent fourteen years as an Investment Banker working for seven different so-called global banks. I was based in London, but travelled extensively during that time.

The year was 1982 or ‘83. I applied for my first job in banking in part because I did know what else to do. I had a law degree and was heading for a rather dull, but thoroughly respectable job in a small North London Solicitor’s firm. I applied for a Graduate Trainee job with the then rising house of Nomura. Much to my surprise, I was invited to attend an interview. I knew nothing about Japan and even less about Investment Banking. Realising that this interview could be a massive opportunity for me, I needed a crash course in Investment Banking, and in matters Japanese, if I was to have any chance of landing a job away from the world of Law.

I had two weeks to prepare for my interview.

I covered the Japanese element in a number of what now look like rather amusing ways. I had a hair-cut at a Japanese Barber’s shop, I went for my first meal in a Japanese restaurant and I read the novel Shogun from cover to cover, writing down any Japanese phrase and words, their English meanings and committing them to memory.

To address my shortcomings in financial knowledge I read the Financial Times every day and I devoured any copies of The Economist I could get hold of. I needed more. As I concentrated more on the interview, I became more and more determined to do anything I could to acquit myself well. I needed to meet someone on the inside. Not someone inside Nomura, but someone who really understood how the world worked inside The City, especially for graduates new to that particular world.

I remembered having met, a few months previously, a friend of one of my fellow students at Law College. The friend of my friend had been at Oxford with him and was generally regarded as a rising superstar. He had always had a clear vision of working in a top league bank in The City of London and, I believe, was offered a job by all but one of the dozen or so banks to which he applied. Of his many offers, he had chosen to work for Credit Suisse First Boston, known as CSFB and had started there at around the same time that I had started my one year course at The College of Law. CSFB was the London based subsidiary of the then Swiss banking giant, Credit Suisse.

I telephoned Stephen Hester at his workplace and explained that I needed his help if I was to stand any chance of success in my impending Nomura interview. Hester, whom I had only met briefly before, checked his diary and said that the only way he could help was if I could collect him at nine O’clock the following Friday evening, from his office. Already the consummate banker, he knew that his advice had a serious market value. We struck a deal that I would buy a Chinese Takeaway for us both which we would eat at his flat in return for his crash course in Investment Banking.

Buying a Chinese Takeaway for Stephen Hester was without doubt the wisest investment I have ever made. Hester and I stayed talking in his small flat until the early hours of Saturday morning. I suppose I was there for around six hours in total.  Hester was without doubt the cleverest person I had ever met and possibly remains so. He gave me, in a few short hours what amounted to a passport into a totally new world. Calmly, and with extreme patience, he led me through the workings of international debt and equity markets. He furnished me with a list of questions to ask at my interview which would simultaneously educate me and impress my interviewer. He answered my own list of questions gathered from my week and a half of deep enquiry into banking. I remember Hester as a very serious person, but someone who had a clear view of a wider world outside his workplace. I remember him as humorous, patient and very, very bright. Even then he had a rare combination of presence and lightness of touch.

I sailed through the Nomura interview process and, in due course, was offered one of twelve jobs out of 600 applicants. My new employers were so impressed with me that they took me out of the Graduate scheme and put me straight into a front line position in the New Issues Bond Syndication Team. The extent to which I lived up to their expectations is a whole other story.

I think I met Hester perhaps a couple of times in the next few years. I hope I was well-mannered enough to write to him by way of thanks, I honestly cannot remember. Despite not having had any contact with him for many years, I have always remained, and always will remain, grateful to him.

Hearing and reading the constant bleating of pundits on whether or not Hester should be paid a bonus, and if he should, how much, sickens me. It sickens me because it is a distraction. It is a distraction from the real issues which are destroying communities, destroying businesses and destroying lives. The RBS bonus debate, focusing mainly on Hester, cloaks the real issues behind the financial mess, what caused it and what can be done to resolve it.

Now that it has been decided to award Hester with an almost £1 million share-holding in RBS by way of bonus, the debate has exploded again.

I certainly do not have all the answers, I doubt whether any single person has. I am certain though that unless Hester has become a very stupid man in the nearly thirty years since I knew him, in which case he should not have been hired to run RBS, he is likely to be worth all he is paid, bonus included, and probably considerably more. I am far too busy trying to survive as a farmer, restaurateur & shop keeper to be able to research this properly but Hester seems to have managed to stabilise RBS.

Stand back for a moment and think about it. Even in my banking days more than fifteen years ago RBS was regarded as a basket case on the Investment Banking and Derivatives side. Structures it came up with and deals it won regularly left other experts scratching their heads in wonderment at how the numbers worked. Obviously we know the answer now. They didn’t work, the numbers did not add up. Add to that, the most extraordinary chaos in financial markets in living memory. Saving, running and then resuscitating RBS is a job way beyond most people. RBS is a huge publicly owned asset. It is central to the financial future and well-being of us all. As I understand it Hester’s bonus is made up of shares. This is surely the best way to continue to motivate him to succeed. If RBS collapses, his shares will be worthless, as will those that we, the people, own. If RBS recovers and its share price recovers, Hester will do extremely well, as will all its other shareholders, some 80% of whom are The Great British Public.

If the ongoing job of reviving RBS can be done by a Muppet, let’s find that Muppet, pay the going rate for Muppets and say goodbye to Hester. On the other hand, unless Hester has become a dribbling useless fool, the decision is fairly simple.

Who is the best person for the job? If Hester is still that person, let’s pay him the going rate, give him the support he needs and let him get on with what is a near impossible job.

This government is at serious risk of falling into the same traps which caught out the last government. It needs to recognise value where it lies. It needs to analyse risk where it lurks and it needs to get on with freeing up the clogged wheels of business, productivity and innovation.


Jan McCourt

Northfield Farm

27th January 2012

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Author: janmccourt

Farmer, owner of Northfield Farm known for his & its pioneering role as a champion of local food, rare breeds, Borough & Broadway Markets.

One thought on “STEPHEN HESTER – An Alternative View”

  1. At that level, the bonus is not sfniigicant. To make the big dollars, you need to become a banker with close ties (i.e., give a lot of money) to the President, the Speaker, and various other corrupt politicians.

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