Plain old Mr. Goodwin as the former RBS chief has reverted back to, may not be the best example to use, but is this witch-hunt of top earning executives over bonuses and pay by an increasingly anti-business media, now going over the top?
Plain Fred Goodwin: A real life Gordon Gekko?
PROFIT SUCCESS FOR HESTER
Goodwin may well have reaped what he sowed as he became the embodiment of Michael Douglas' Wall Street character Gordon Gekko, but the pressure on his successor Stephen Hester to refuse his share bonus, at times bordered on the hysterical. By all acccounts Hester has done a brilliant job in a difficult climate and turned around a bank that was literally on its knees when he took over. A 2010 third quarter loss of 1.6bn became a 2011 third quarter profit of 2.0bn. If ever there was a solid case for what was effectively a paper bonus to be made to a banker, then this was it. Hester remains on course to steer the RBS group to even greater profits and return the billions loaned by the tax-payer at the height of the banking crisis. This feat alone should have ensured that he received praise and not damning criticism.
RBS Chief Stephen Hester
It's almost as if the word 'profit' has become a dirty word. When it's reported that a large group has made mega-profits, particularly in the public sector, sections of the media would have us believe that those billions are to be distributed among just a few executives. There's little talk about reinvestment into infrastructure, research and jobs that such profits allow for. Why would there be? Publishers need to sell papers...to make a profit!
APPLE PROFITS
Where was the press outrage when Apple announced in January quarterly profits of $13 billion? With its 'cool image', it is viewed as an iconic company and representative of the 21st century; a self-styled culture which it cleverly manipulated because we've bought into the idea that we need new and trendy technology to help us 'stay in touch' while we are on the go. Where were the demands for a windfall tax then?
ENERGY COMPANY PROFITS
On the other hand, take the energy companies. On its own website British Gas shows that its last operating profit was £120m. When those figures were first announced the calls for a vast cut in the cost of our energy bills was deafening. But look at it another way. British Gas serves around five million homes which means that the profit they made from my home was an 'inflation busting' £24.00 per year.
To bring down the cost of fuel, the energy companies need to make cuts. It's highly likely that British Gas overspend heavily in areas and so finding a way to reduce overheads without having to cut jobs maybe possible. But if we're going to have a go at companies like British Gas, let's have a go at them for the right reasons, not for making a profit or paying the going rate to executives who have ensured that the company remains a profitable one.
My point is that more often than not we need to look beyond a sensationalist headline. Those profits of £120m mean that British Gas are able to improve its infrastructure and research new technologies which will hopefully lead to the development of cheaper fuel types. Those profits also guarantee jobs. The difference between them and Apple is that I-Phones are sexy and we choose to buy them, while fuel is not sexy and we have to buy it. But in terms of business development, what's the difference? Both companies make a profit; both companies offer huge employment opportunties; both companies reinvest profits into research and development.
PROFIT NOT GREED
While it's true that some organisations may have paid dividends to shareholders when they shouldn't have and others have paid excessive bonuses to greedy executives, regardless of success or failure, shareholders are investors who invest for one reason - to make a return and we have seen what happens when people choose to stop investing.
So instead of jumping on the 'dirty profits' bandwagon, maybe we should be thinking in a more positive fashion about companies that make large profits. This is particularly true in the current climate when more than ever we need them to stay strong and be in a position where they can keep offering employment opportunities to so many.
Maybe profit has become confused with greed. But there is a distinct difference between the two. Gordon Gekko said greed is good, but the difference between profit and greed is like chalk and cheese or maybe even Fred Goodwin and Stephen Hester.
Posted on
Wed, February 1, 2012
by admin
filed under