21 February 2009

Incentives to fail...

...well, maybe not, but certainly 'absence of incentives to succeed'. Ross Clark writes:

You think you couldn’t find a more extravagant bonus culture and an even more absurd system for rewarding failure than xists at the banks? Just look at the public sector. In fact, let’s start by looking at the public sector employee who was charged with the task of monitoring the banks to ensure they didn’t get into trouble. That man was Clive Briault, managing director of retail at the Financial Services Authority.

Having failed completely to detect anything wrong at Northern Rock, he resigned last April. That is as it should be, except that far from falling on his sword, Mr Briault appears to have been allowed to run off with it and melt it down and use the silver to augment his pension. The FSA’s annual report reveals that he left with £356,452 of compensation for lost salary and bonuses, £36,000 of pension contributions and £202,500 for ‘compensation for loss of office’.

Hang on, let’s just get this right. An employee resigns because he failed to do the job demanded of him — and he still gets paid a bonus, plus compensation for suffering the ignominy of having to resign. His case is not a one-off. Take Rose Gibb, who left her £150,000-a-year job as chief executive of the Maidstone and Tunbridge Wells NHS Trust just before the publication of a critical report by the Healthcare Commission into an outbreak of Clostridium difficile in which 345 patients died. To see her on her way, the Trust offered her a £250,000 severance package. Only £75,000 of this was pay in lieu of her notice: the other £174,573 was, as with Mr Briault, ‘compensation for loss of office’.

Although, after an outcry, the Health Secretary, Alan Johnson, tried to block the payout, he later backed down and allowed Ms Gibb her £75,000 in lieu of notice. Even so, she has gone to the High Court to claim the full whack.

What kind of an employment contract is it that ends up paying you more for being booted out for failing than it would have done had you worked out your notice? The sort of employment contract which is all too common in the public sector, that’s what. The government no longer offers jobs for life; it now just offers payment for life, whether you manage to hold on to your job or not. Want a big bonus? Get yourself a public sector job, Ross Clark, 'the Spectator' [London], 21 February

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