Prepare for "an out-of-body experience". We have Sir Philip Hampton, the chairman of Royal Bank of Scotland, to thank for describing that memorable reaction to negotiating a £4m bonus with an employee of the bailed-out bank and the recipient's fury at the level of the payout, which he considered derisory. A rival of the unnamed banker was getting £6m. "This is absolutely outrageous to them, that somebody is getting 50% more," Hampton recalled.
The RBS chairman will no doubt be braced for a round of similarly awkward experiences in the weeks ahead, as banks around the City enter their annual bonus season. While Hampton will undoubtedly be doling out large sums – in 2012 RBS handed out at least £1m to 95 bankers – the figures will be dwarfed by rivals if history is any guide.
Take the US banks. In the coming fortnight the biggest players on Wall Street – Goldman Sachs, Morgan Stanley and JP Morgan – will all report results for 2013, which will determine the size of the payouts to their workforces. Data published just as the old year was ending provided a timely reminder of the pay deals on offer to top financiers.
In 2012, the average pay of 115 senior risk-takers at Goldman Sachs in London was more than £2.7m. At JP Morgan – in a year when it suffered the disastrous London Whale trading incident – the top 126 London-based staff were handed £2m each. At Bank of America Merrill Lynch the average stood at just under £1m.
In just the first nine months of 2013 the big US banks set aside $63bn (£39bn) to pay their staff. Analysts at Sanford Bernstein reckon that Morgan Stanley and Goldman Sachs will pour another $6.3bn into the pay and bonus pot when they report their full-year results next week. The brown envelopes outlining the size of each employee's bonus will he handed out shortly afterwards.
The US banks are not obliged to admit how many of their employees receive more than £1m, but the UK banks are starting to providing such information. Barclays has recently admitted that in 2012 it paid 428 staff more than £1m – which is more than double the number handed such a sum by HSBC, a bank twice as big. Recent data from the European Banking Authority, the pan-European regulator, showed that more than 2,700 London-based bankers received at least €1m (£830,000) in 2012.
With these numbers in mind it is little wonder that lawmakers in Brussels – representing individuals who have endured years of austerity, falling real wages and rising unemployment – set out to try to put to a lid on pay. As of the start of this year, top bankers will have their bonuses capped at a level equal to their salary – or double their salary if shareholders approve.
That has prompted a major scramble by banks to find ways to circumvent the new rules. Barclays, for instance, is handing its staff an extra allowance – a new, third payment, not classed as salary or bonus, to get round the restrictions. Even before the regulations come into force, Brussels has failed to stop bankers' pay spiralling further out of control.
Antony Jenkins, the boss of Barclays, has promised shareholders they will get a bigger share of the spoils in the years ahead in the form of dividends. But that will not tackle the level of bonuses. Jenkins said only last week that "to be in certain types of business, you have to accept the pay structures in those industries" – basically a message to shareholders and regulators that they will just have to suck it up. And a signal of more out-of-body experiences looming.
Next boss's results are their own reward
Justin King, chief executive of Sainsbury's, has been named the businessman's businessman not once but twice in the past few weeks. He snaffled the Management Today accolade of Britain's most admired leader in November, and on 3 January was picked as most impressive business leader in the Ipsos MORI annual captains of industry survey.
While not taking anything away from King's stewardship of Sainsbury's, it is remarkable that Next boss Simon Wolfson is not held in equal, if not higher, esteem.
On Friday Wolfson unveiled a Christmas trading update which smashed expectations – year-on-year sales up 12% in a supposedly grim market for clothing, powered by high-street sales up more than 7% and online sales rising more than 20%.
The shares rocketed to £60.85 – up 10% on the day and 57% on the year. When Wolfson took over 12 years ago they were around £10.
Next is now valued at some £2bn more than Marks & Spencer, even though its turnover is less than half that of M&S. This year, for the first time, Next is expected to make more profit than its rival: some £684m-£700m, compared with an expected £650m at M&S. When Wolfson, then just 29 years old, was made a director of Next in 1997, the chain was making £160m a year. In the same year M&S made more than £1bn.
Of course, part of the reason Next has made such advances on M&S is that the grand old lady of retail has made so many errors over the past few years – poor products, failure to invest in stores and distribution, failure to get ahead of the curve online. Next has also made mistakes – it has just recovered from them better.
Both businesses are fishing in the same tough, mass-market, mid-priced, middle-England, own-brand pool. But while M&S has flailed around, Wolfson's quiet discipline, which includes strict rules on matters such as store openings and share buybacks, and excludes starry behaviour like posing with models, has paid dividends – literally so this year, in the form of a special 50p-a-share payout.
Here's looking at you, chiefPlaying ugly in business doesn't always guarantee success, according to a study by economists at the University of Wisconsin. It found that good-looking bosses earn more – and prettify their companies' share prices too.
Using a facial attractiveness index to rate chief executives in S&P 500 firms, the study found share prices improving on days when the attractive chief executives appeared on TV, and that better-looking bosses achieved better returns in mergers and acquisitions, too.
Marissa Mayer, the new boss of Yahoo, was one example, scoring 8.45 out of 10 for facial attractiveness and presiding over a doubling of the company's share price. The researchers stressed that the increase was not solely down to her appearance and were not suggesting that bosses should only be hired for their looks. But beauty is in the eye of the shareholder.