Remember the Redskins? I don't mean the American Football team, I mean the English skinhead band from the mid-80s which sang some glorious northern-soul style agitprop songs, culminating in the single "Bring It Down (This Insane Thing)!"
I first saw them live in 1984…who would have thought that when I heard that song's lyrics, 30 years later it would have turned out that yes indeed, the system is beginning to look like a very insane thing – just not for the reasons my optimistic but sadly naïve heroes from York thought.
How many times have we heard that the bank bonus system is needed in order for banks to attract "the best", that pay levels are where they are because of the need to retain the best people? If the best could manage the debacle of 2008, I'd hate to see what a team of mediocre executives could do.
But that's the great myth isn't it? Because mediocre, or downright incompetent, is what we get a lot of the time.That might not be down to the bonus system, but it's certainly down to the excessive short-term culture that grips the stock market. How much time and energy of senior executives in banks and fund management institutions is spent on the quarterly analyst report? Quarterly! For a concept that is supposed to be rooted in long term prospects, it's the ultimate paradox that share prices are scrutinized on daily movements and quarterly reports.
And this heavy emphasis on the short term makes corporate executives risk averse and uncreative. It becomes all about the day-to-day share price, rather than planning over a long term time horizon. And these same corporate executives – in a great many industries, not just banking and finance – are overseen by theoretically independent directors who often are not experienced, let alone experts, in the business that they are supposedly steering towards sustained success.
Oh for a Board that did away with the quarterly briefing! But then why rock the boat? Once one attains the glorious heights of the Board, whether as executive or non-executive director, the remuneration is bountiful and as long as there is no big mishap the individual can look forward to big rewards. And where has that got us today? Senior managers in so many companies who are, apart from being good at office politics, really more administrators and bureaucrats rather than entrepreneurs. The "corporate man" (or occasionally woman) who is beneath the surface a cardboard cut-out automaton, terrible at providing genuine leadership and with all the charisma of a local council committee chairman, but good at saying the right thing to the right person at the right time. Ring a bell? How many of us have met such people occupying senior positions?
It's a pity. Because this really is a big deal. Western economies will not be able to compete, either on an absolute level or on a relative productivity basis, if the system carries on like this. Just as the public sector is being overwhelmed by the welfare state, so the private sector will be overwhelmed by the short-term culture of the modern equity market.
Bring it down! Not in a revolutionary socialist sense, but in a genuine free-market, entrepreneurial sense where it isn't the company man who ends up calling the shots, but the person who possesses the flair and vision both to lead and inspire.
Professor Moorad Choudhry is at the Department of Mathematical Sciences, Brunel University and author of The Principles of Banking (John Wiley & Sons 2012).