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Bonus view

24 January 2012 By Richard Beales

Royal Bank of Scotland boss Stephen Hester should take a bonus but give it to charity, according to Breakingviews columnist George Hay. He reckons this would address the toxic politics of collecting a big payment from the government-controlled UK bank. That’s humbug. Philanthropy is to be encouraged, but it’s not a valid defense for a bonus.

Hester’s payout is calculated based on performance under five headings. Whether they’re the right ones or not, it may well turn out he’s entitled to at least part of a sum currently worth up to 1.6 million pounds. If RBS’s board decides a payout is due, Hester could take it without shame – if not without criticism. But if he finds it morally or merely politically indefensible, then he should decline it. The supposed third option, accepting it but promising to give it away, isn’t really any different from just taking it.

Plenty of financiers and others lucky enough to get rich enthusiastically support many worthwhile causes. That’s praiseworthy. It often helps less fortunate people as well as bringing the donor satisfaction. There can also be justified tax benefits.

That’s all well and good, but too often what people choose to do with their cash gets unnecessarily conflated with questions about how much they should be paid. However Hester spends any bonus, RBS’s shareholders – including British taxpayers – will never see the money again.

Donations can help someone’s favored causes, and even keep family members employed. They can add to the influence already wielded by the wealthy. And in terms of maximizing the greater good, a bigwig’s bonus might anyway be more efficiently deployed hiring unemployed drivers and housekeepers, or construction workers to build a new, lavish home.

The question of charity also clouded the debate over bonuses at American International Group and elsewhere in the aftermath of the financial crisis. Hester’s performance may, strictly speaking, have earned him a bonus. If so, great. But if he can’t persuade himself it’s fully deserved, he should turn it down. Giving an unjustifiable handout away may make the recipient feel better, but no one else should be fooled.

 

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