Bonuses do not work. It is not about banker bashing, it is about what actually provides incentives

Bonuses do not work. The situation with RBS goes to show all too well. The RBS board has awarded the CEO a bonus of £1 million in addition to his £1.2 million salary despite:

• RBS over his term has cut lending to small business as it has continued to de-leverage its balance sheet
• RBS over his term has seen its share price crash by 40%.
• RBS over his term has left the tax payer sitting on an even bigger loss on its 83% stake in the bailed out bank, where the break even price is 50p against the current price of 27p.
• RBS has sacked 33,000 of its workers over his term.
• The tax payer is sitting on RBS liabilities of over £1 trillion, which is the same as total official public debt. (Market Oracle)

In this post I highlighted the presentation by Dan Pink where he outlines experiments relating to bonuses and motivation to conclude that where a task requires cognitive skill not only do bonuses lead to worse performance but the larger the bonus the worse the performance. In other words bonuses do not work.

If bonuses do not work, as a party we should look at what does and stop what doesn’t.

In Praise of The Independent: Finding strengths in Nick Clegg

The Independent write Clegg can reap rewards from his canny tax plans in which there is significant praise for Nick Clegg which is worth reading:

Another politician showing more boldness since the turn of the year is Nick Clegg. He ruffled Tory feathers this week by taking the unusual step of making public the Lib Dems’ demands for the March Budget. His call for the speeding up of plans to raise personal tax allowance to £10,000 a year is also a “win-win” move.

The long-planned address was well-timed, coming a day after the negative growth figures. Without breaking ranks with the Tories on deficit reduction, there was a hint of Keynesian economics to contrast with the fiscal conservatism of Cameron-Osborne.

More far-sighted Tories acknowledge the Deputy Prime Minister is playing a clever game on tax. If he wins speedier tax cuts, it would be a boost for the Lib Dem brand. If Mr Osborne rejects the idea, and the higher taxes on the rich needed to pay for it, then the Tories’ Achilles heel – that they are the party for the rich – will be more exposed.

Mr Clegg’s clever speech worked on yet another level. His proposed tax cuts for the “squeezed middle” invaded the territory occupied by Ed Miliband – and highlighted the gulf between opposition and Government.

In Praise of The Daily Telegraph: Finding strengths in Nick Clegg

The Daily Telegraph write Osbornomics is unravelling, and Nick Clegg is right to sound the alarm in which it offers some praise for Clegg’s recent positioning, which is worth highlighting:

Things have come to a pretty pass when the Liberal Democrats are urging the Conservatives to cut taxes. But Nick Clegg has a point: the economic situation is dire, people are growing poorer and radical thinking is required… So Nick Clegg is right to sound the alarm. An economic plan that seemed fine a year ago seems dangerously inadequate now, and people are hurting. There is indeed a “boiling point” of living standards, as people’s pay rises don’t keep up with the cost of living. And, as Clegg says, it is a “universal principle” that money is best left in the hands of the people who earned it. While Osborne clings to the wreckage of the Brown years, the Deputy Prime Minister is coming to define the Government’s economic narrative.

In Praise of The Guardian: Finding strengths in Nick Clegg

The Guardian write Nick Clegg: taking from the rich, not giving to the poor today which offers some praise about Nick Clegg’s recent positioning which is worth highlighting:

Bravely opening budget negotiations in broad daylight, the deputy prime minister made plain that his overriding priority is instead a general income-tax cut… by making public demands about what should be in the budget, he is now haggling more aggressively than ever before. While Tory tax-cutters might lick their lips at the giveaway that the Lib Dem leader proposes, they will have shuddered at the other half of what he had to say. He wants to pay for the move through new levies on wealth, including on costly homes, as well as – and this was especially welcome – a refashioned fiscal rulebook which starts from the presumption of a general anti-avoidance rule. We shall see how much of this he can achieve from within the confines of a Conservative-dominated government. But at the very least he is developing the discourse in a positive way, and challenging Labour to sharpen up its sluggish thinking on filling the tax gap.

Campaigning tool: simplifying the process for effective campaigns

We all have different ways of managing what we need to do. Sometimes we are more productive than others, some people have better systems than others, but the aim is the same: to get things done that demonstrates our commitment to making the area better and to the principles of the party. The solution focus approach has many tools which may assist in this aim and here is one which you may find useful:

Forms can be useful, and I am a believer in a forms being no longer than 1 page. What this form helps with is setting out the problem, seeing what has worked before (acknowledging that things have been tried and have worked, even if only limited) and what you want it to look like if things were perfect (this links to the principles of the party).

The scale is 0-10. 0 being as bad as it can get and 10 being as good as it can be. This allows you to see where you are at right now – your judgement. Your judgement is very important as this is what voters look for to see if you represent their views; the closer your judgements the more likely they will think you represent them.

The form should be worked on, with bits being filled as you go along, so you can learn from what works. It helps keep focused and on track. It can be used for any issue from increasing membership in your local party, to local issues like getting fly tipping removed. It is clear, simple and effective. Thanks to Appreciating Systems for its development. Any feedback welcome as to its use.

In Praise of The Independent: Finding strengths in Chris Huhne, Vince Cable and Ken Clarke

The Independent write Somebody’s got to stick up for Chris Huhne… in which they offer some praise for not only Chris Huhne but also Vince Cable and Ken Clarke which is worth highlighting:

And what a shame for those of us who have come to admire the vulpine ultra-leaker not just for his work as Climate Change Secretary, but even more so as one of only three staunch Cabinet defenders (with Vince Cable and Ken Clarke) of the civilised values

University Union applauds the Lib Dems

Following the news today that the government has abandoned plans to reform the university system that would have made it easier for private colleges to set up new universities, Sally Hunt, the general secretary of the UCU, the college lecturers’ union, has come out to praise the Government:

The government should be applauded for appearing to listen to the experts in the case. We will continue to expose the dangers of allowing those whose first priority is to their shareholders a greater hold on our higher education system.

While she was praising the Government, it was the Lib Dems who were opposed to this move and it looks like they have made a difference on this decision.

How to create a liberal economy, tackle bonuses and differentiate in a time of austerity

All parties are fighting it out over who is in touch with the public more when it comes to the economy. While the rhetoric is flying around it seems to be business as usual in the City with a proposal for $1.3m bonus for RBS chief; making it an easy target for Miliband to attack the Coalition. What we need to move from is a position of rhetoric to one of principle in action. While there is no action on bonuses, we will see case by case arguments between the parties, such as this one involving RBS. It would save a lot of trouble if we came out with concrete proposals for the whole system by which we can assess each case while at the same time distinguish between us and everyone else.

Clegg’s recent speech on the economy was good in many respects and begins a conversation about they type of economy/business we want in the UK. However, there are two issues with it. One is that it did not define what purpose we want a corporation to have in the economy in the first place. Miliband tried it with limited success (anything based on good/bad is surely too vague to have real meaning). The second is that having employees on boards and owning shares won’t necessarily change the way the corporation operates. The Harvard Business Review helpfully sets out what they would consider to be a good model for the purpose of corporations which may be helpful for the party:

the purposes of the corporation today are threefold: creation of durable value for shareholders and stakeholders through sustained economic performance; sound risk management; and high integrity

Clearly this is not the case with RBS and hence the rise in anger over their recent proposal. The petition to call on Osborne to block RBS’s bonuses also includes banning RBS on lobbying the Government (see here).  Harvard Business Review believes that Governments should establish and publicise substantive measures of economic performance beyond stock price of corporations, their risk management and how they promote integrity which should guide, justify, and constrain future executive compensation. This would also provide a bigger benefit for all those employees who become shareholders than would currently.

While this would be a good move there are other moves which could also be added which would be simple and effective in communicating our position thanks to Tax Research UK:

• A ‘top to bottom’ pay ratio
• Ban all corporate tax relief on salary and remuneration packages over £250,000, increasing the cost of paying them and removing taxpayer subsidy from high pay
• Ban incentives that relate to post tax cash flow earnings that have the effect of encouraging tax avoidance by multinational corporations. These have explained the boom in tax abuse
• Ban bonuses, however earned, of more than 100% basic pay (itself pegged by an earnings ratio cap) by applying a 100% tax on all bonuses

Such moves would set out a clear position by which we can differentiate from other parties at the same time as being clear and consistent in our criticism of bonuses and business culture.

What would be a success for the Lib Dems in 2012?

What would you consider to be our successes and failures since being in Coalition? These, simplified, will come to define us when it comes to the General Election. I recently looked at how each issue will be seen by the Tory and Lib Dem voters to show how we can look at each issue in a more useful way. A number of people got in touch and added to what I already had and the result is this:

While nothing can be done about what has been done and how it will be seen, we can think about future issues and how they will be seen. For a Coalition to work as smoothly as possible, both parties should focus on the ‘good for tories, good for Lib Dems’ box as this will be the easiest set of issues to negotiate and implement. This will be supporting small businesses, curbing bankers bonuses, and getting the economy growing again.

However, when it comes to the politics, each party will be looking to implement issues in the ‘good for us, bad for them’ box. The Lib Dems need to get smarter when it comes to this strategy and while it may be harder being the junior partner of a Coalition, it is still an important part of being in this Coalition.

Clegg and Cable have started well in 2012 and there needs to be some concrete wins from such moves. Charles Kennedy had some very good advice last year (here) where he believes we  are spread too thinly and so we should pick our fights and make sure we win them. This would be a good tactic and focusing on the top boxes would make sure this happened. However, what Kennedy fails to see is that not doing anything on some issues means that we look like we have reneged on our positions and so we are dragged into a fight we don’t want to have. The Tories are good at politics and we need to be aware that the more they continue to drag us into fights we don’t want to have, but have no choice, the more they are controlling the agenda and the more negative we look. One counter to this is to do it back. Raise issue after issue that they have to defend and so we control the debate. But this is dirty politics. It would be better to get all parties to focus on the top right box but I don’t think this will happen.

When it comes to 2013 we need plenty of things to go in the top boxes that we can campaign on:

Why the Lib Dems are behaving like narcissists*

 

Title has been changed (see below)

While it may be strange link to make, it is an important one. We may believe we are doing the right thing, but so do people who do horrific things. We need to keep ourselves in check.

Narcissists can come across as flashy and neat, with good interpersonal skills, charming glances, with an air of competence, self-assured behaviour and humour, however there is a darker side to these people. The narcissist is fixated on their image and activities are directed toward the enhancement of their image. The result of this is that a narcissist can be ruthless, exploitative, sadistic, or destructive to another person because they are so insensitive to the other’s suffering or feeling. But what characterises a narcissist above all else is the striving for power and control. Someone who feels superior to others needs to have some evidence and this manifests itself in gaining power and control, otherwise known as winning. See here for experts talking about being in a relationship with someone who is narcissistic.

So what has this got to do with the soldiers who act ‘immorally’ e.g. urinating on dead bodies or Abu Ghraib. It is difficult to comprehend why trained professionals would act in such a way but framed in terms of narcissism it can be seen very differently:

The connection between the overriding importance of winning, the denial of feeling, and the role of the image is most evident in warfare. Since victory or defeat is seen as a function largely in terms of life or death, there is no room for feelings. Soldiers function largely in terms of images. However, they retain their humanity by their feelings for a buddy or the squad members with whom they have personal contact. Without these feelings they risk becoming killing machines or going insane. A soldier is not a narcissist, but war forces him to act like one – Dr Lowen from Narcissism.

So the horrific acts make more sense when we see that soldiers act like narcissists, who can be cruel and abusive. The difference between a soldier and a genuine narcissist is that a soldier retains some form of humanity through a connection with his regiment/platoon/ friends. So what has this got to do with the Lib Dems?

Traits of narcissism could be seen in Margaret Thatcher and her demise, which will be remembered through the Poll Tax. Her belief that millionaires should pay the same as low income earners seemed cruel and out of touch yet as she could not empathise with people she failed to see a problem with the tax. Narcissists are often out of touch with reality and as they feel superior to others they feel they are born to lead. To compare a narcissist to healthy development we can see Thatcher’s behaviour more clearly:

Characteristic	Healthy Development	Narcissism
Self-confidence	High outward self-confidence in line with reality	An unrealistic sense of superiority (“Grandiose”)
Desire for power, wealth and admiration	May enjoy power	Pursues power at all costs, lacks normal inhibitions in its pursuit
Relationships	Real concern for others and their ideas; does not exploit or devalue others	Concerns limited to expressing socially appropriate response when convenient; devalues and exploits others without remorse
Ability to follow a consistent path	Has values; follows through on plans	Lacks values; easily bored; often changes course

The Lib Dems are not Margaret Thatcher but for many the Coalition Government has put forward plans to cut benefits for disabled children and cancer patients and Lib Dems Ministers and the party are seen as supporting it. When it went to the Lords only 5 rebelled (although many abstained). This has caused a depth of feeling similar to other issues such as tuition fees and other benefits caps. A feeling of disregard, unsympathetic and to many cruel. The story (i.e. perception) for many is that the Lib Dems are behaving as narcissists (Thatcher): feeling superior to what they really are, saying anything to gain power, showing no remorse for decisions made which affects people’s lives and a focus on their image rather than on what is good for the country (and them).

The reason why the Lib Dems are more like the soldiers than Thatcher is that the Lib Dems do have sound values and good reason for being in power. We do care about the decisions we make, it is just that in the situation we now find ourselves in, no one can see that. The decisions we are making are horrific to many. We may not be narcissists but being in Coalition is making us act like one. We need to show that we are not.

• Keep a focus on our values and do not bend them to fit the situation.
• Show genuine feeling for the people who are affected by the decisions we make.
• Be prepared to stand up to things that will harm people.
• Be prepared to take on criticism.
• Abstaining is not a rebellion. Voting against is. If you want to show that you do not support something, own that decision. Abstaining will not show you care.

* the title has been changed, as the original title has caused offence. I should have realised it would, but I didn’t. I thank those who have left feedback and comments. All feedback, positive and negative, is taken on board.