Today’s press is full of coverage of Lloyds decision to clawback some of directors’ 2010 bonuses because of the cost of PPI misselling. Good decision. They messed up, but were initially rewarded for succeeding and that should be corrected.
Unfortunately it misses a bigger issue. The Lloyds takeover of HBOS has much in common with the RBS takeover of ABN Amro. In each case it almost brought the company down and led to massive shareholder dilution as the government bailed them out. The difference is ABN Amro was trading ok when it was taken over, but HBOS was already going bad. Which makes Lloyds mistake worse, yet the directors responsible are the same ones seeing their bonuses clawed back. The question is not whether this is fair. The question is why did they still have a job?