Camelot fat cat compromise is hollow victory for Government

Camelot’s executives may have agreed to pay back part of the bonuses, but a greater understanding of the Lottery is the real prize for all players. By Nick Higham. Nick Higham is BBC Television’s media correspondent.

Last week provided further evidence that you shouldn’t believe everything you read in the papers (or, indeed, hear on the television and radio).

It came at the end of the row over “Lottery fat cats” and their bonuses, first revealed a fortnight ago by this magazine, and at the end of a week which saw the confrontation between the Government and Camelot grow increasingly ugly.

Heritage Secretary Chris Smith had summoned Camelot’s chairman, Sir George Russell, to see him on Monday. Sir George offered to hand over to charity, out of Camelot’s profits, a sum equal to the amount paid to the executive directors in long-term bonuses – but said he couldn’t force them to hand back the money themselves because they were entitled to it under their contracts of employment.

Smith said that wasn’t good enough. He wanted the directors to hand over “all or some” of the bonuses they’d already received, and “all or some” of any future bonuses.

Result: impasse. Camelot’s shareholders said they thought the bonuses were fine – good money must be paid to attract and retain good managers, Camelot’s top team could earn just as much elsewhere – and the directors themselves discreetly let it be known that they would rather resign than hand over the money.

Furthermore, two of the shareholders, Racal and De La Rue, made it clear they didn’t think much of another of Sir George’s concessions – an agreement to consider ways of turning the Lottery into a not-for-profit venture. Both companies would not be interested, they said, in investing in something that didn’t offer them a dividend as a return on their capital.

For its part, the Government insisted that something had to be done: Camelot and its directors simply didn’t realise the strength of public feeling on the issue.

In the event, both sides compromised after a “high-level” political intervention which Downing Street knew about, even if it didn’t initiate it (negotiations late on Thursday were conducted between Sir George and Smith and their respective executives and officials).

But often, in these circumstances, one side has to compromise more than the other. Which was it in this case? Who won?

This is where you’d be advised not to accept uncritically what the media tell you. News organisations had some room for interpretation – and they took it.

Several newspapers, and ITN, reckoned the Government was the victor. The Camelot directors had been forced to eat humble pie and hand over some of their bonuses to charity, after initially refusing.

But other papers, and we at the BBC, rather thought Camelot had won. Smith, having demanded repayment of the bonuses already taken, had to settle for an agree ment which allowed the directors to keep them, and pay only some of the bonus due this October. But they don’t have to hand over all of it, or even say how much they’ve paid.

The question of who is perceived to have won isn’t just academic. In some quarters (like The Financial Times and the Institute of Directors) the episode was taken to indicate that the Government was anti-business, apparently opposed to the kinds of incentive schemes which are part and parcel of the enterprise culture it is supposed to embrace.

The Government’s sensitivity to this charge may perhaps be gauged from the fact that I was rung up by two separate government spin doctors on Friday afternoon, worried that BBC TV News wasn’t giving their answer to this charge sufficient emphasis (basically, that Camelot, running a lottery set up by an Act of Parliament and handling the “people’s money” destined to go to government-nominated good causes, isn’t like other businesses).

Yet equally there is genuine and widespread public outrage at the Camelot directors’ actions: the Heritage Secretary undoubtedly had public opinion on his side when he chose to get tough with the fat cats.

The Lottery’s reputation – as well as the Government’s, in certain quarters – may have been damaged by the row (although the business might have suffered more seriously if its top executives had walked out).

The mistake Camelot’s directors made in taking their bonuses at a time when the Lottery’s contributions to good causes were falling shows a woeful lack of awareness of how the gesture was likely to play with the public. It suggests the directors, like the company’s shareholders, have yet to see the Government’s point that Camelot isn’t just any old private sector company but a quasi-public sector utility, subject to different rules from business as a whole.

But equally, the money the directors get is not out of line with what executives in similar companies in the private sector can expect. That the public fails to grasp this suggests many people are simply ignorant of what top executives in the commercial world earn.

If anything good has come out of the past couple of weeks, it may be greater understanding by both Camelot and the Government of just what kind of bizarre animal the Lottery has become – and that, with the change of government, Camelot must now play by new rules, however much its shareholders may not wish it to.

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