RBS said yesterday that no bonuses or pay increases would be made to staff associated with the major losses of 2008. Let us hope this is the end of the reward for failure regime and the start of a longer-term approach to assessing success. The dramatic drop in the headline number from £2.5bn paid out last year to about £175m now suggests a necessary cultural shift.
Only two groups are highlighted for more generous treatment. Lower-paid staff who were not in charge of the high-risk activities that brought the bank down will be protected. RBS is also seeking to avoid losing highly skilled and experienced employees who can see opportunities elsewhere. Those who are essential to the bank's recovery and who might otherwise be at serious risk of leaving, and yet who remain with the group, will be in line for a deferred award for 2008, payable in RBS subordinated debt.
This adds up to a sensible and welcome approach. It is right that only the contractual minimum in guaranteed bonuses should be paid. But it is also right that the terms of the contracts should be met without going to court. At the same time, RBS is wise to find ways to offer rewards for footloose stars: its recovery will require all the talent at its disposal.