Giving up banking bonuses alone is not enough for real change, argues ResPublica's Dion Watts
The media was abuzz on Monday morning with the news that
Stephen Hester had decided to forego his much-maligned £1 million bonus. After
the Chairman of RBS turned
down his £1.4 million, and Ed Miliband threatened to put the matter to
a Commons debate, Hester and the Government finally
gave up "defending the indefensible" as Lord Oakeshott
triumphantly put it. However, much of the criticism surrounding Hester’s
bonus is ironically framed along the very lines that his opponents object
to: it is concerned only with give and take at the top of the
organisation.
To argue that Stephen Hester should refuse, or be forced to give
back, nearly £1 million worth of RBS shares is to miss the bigger picture.
Focusing on the individual case, while ignoring the system which created and
continues to perpetuate the disparity between companies' top earners and
their average workers, is stopping short of what the Government as majority
shareholder could achieve. Rather than putting pressure on Hester to return the
bonus, this was a chance for the Government to ‘walk the walk’ on all its
recent talk about opening up employee share ownership and creating a John Lewis economy.
Is it likely that the public would have objected to the same
£1 million being distributed evenly amongst all workers at the bank? Hardly.
What a missed opportunity then to kick start a new drive towards mass employee
share ownership? What more fitting way to launch this policy initiative than
with an 82 per cent publicly-owned bank giving every one of its staff a stake
in the business? If the Government truly believes its own rhetoric that
employee-owned enterprises tend to perform better, then this move would also
make sense in terms of accelerating the return of taxpayers' £45 billion
investment in the bank.
Moreover, the move would have another, arguably more
powerful, effect in that it would give the public a sense of being in control.
Hester's bonus attracted so much bad press because it was symbolic of what many
people feared when RBS was bailed out: that it wouldn't be long before their
tax contributions were fuelling the same culture
of excess which brought down the bank in the first place. Many felt that
they were being forced to buy into the problem and powerless to do anything
about it. The returning of the bonus merely counteracts that negative; it isn't
a positive in itself. Therefore, an equally symbolic gesture in the opposite
direction is needed to show that RBS is now a bank of the people, having
changed its extravagant ways for good.
How much further can we take this idea? Could business
eventually set an example to wider society? Apathy in political and market
reform may have emerged due to the lack of a real participatory economy,
whereby citizens are able to acquire a stake in society through ownership of
assets, the preservation of which in turn nurtures an active interest in the
social order. Perhaps if more people were given a genuine stake in their
employer, we would begin to see this phenomenon on a much larger scale. The Government's
Consolidated Co-Operatives Bill and plans to mutualise
the Post Office are steps in the right direction. Giving shareholders further
powers to set executive pay, as has been implemented
successfully in the US, would create an even greater sense of
responsibility.