Mention bonuses for bankers and you unleash a torrent of fury, directed at the bank bosses, whose bad judgment, and incompetence, is seen as being a main cause of the international financial crisis. In the U.K., the government is being urged to impos e rules on the banks (which have been bailed out with government — that is taxpayers’ — money). Some banks are fuelling the flames of criticism by indicating that where bonuses are concerned, it will be business as usual.
In The Observer, Will Hutton, Executive Vice-Chair of the Work Foundation, has written: “We can’t go on with a system in which directors essentially award themselves bonuses for non-performance”.
For obvious reasons, it is the bonuses for bankers on which most attention is directed, but the bonus culture applies much more widely. For example, in 2008, according to a survey carried out in association with the Chartered Management Institute, directors and managers received a higher rate of increase in salaries and bonuses than in 2007, and the average director’s bonus rose from GBP 61,511 in 2007 to GBP 78,223 in 2008.
The fact that bonuses have become so much a part of the reward structure in employment raises some questions which are more wide-ranging than what might be called the “bankers’ bonus bonanza”. The fundamental question, surely, is whether bonuses are actually necessary, or desirable, at all, except possibly as a means of recognising outstanding performance beyond the call of duty. Should they be paid to people who are just doing their jobs well? Is it not reasonable to expect people who are doing a job which they have chosen to do, for the pay which they have agreed, to do the job well? That, after all, is what they are being paid for.
As I pondered this, I realised that this is a concept with interesting origins. The principle of “a fair day’s wages for a fair day’s work” was set out by Friedrich Engels, the collaborator of Karl Marx, in an article in the Labour Standard May 7, 1881. Perhaps not surprisingly, for Engels, the founder of “scientific socialism”, it was not straightforward. What, he asked rhetorically, are a fair day’s wages and a fair day’s work? For the answer, he declared, “we must not apply to the science of morals or of law and equity”, adding, “what is morally fair, what is even fair in law, may be far from being socially fair. Social fairness or unfairness is decided by one science alone — the science which deals with the material facts of production and exchange, the science of political economy”.
This, obviously, is a long way from the simple question: Would it not be better to concentrate on pay rather than bonuses? Of course, if that were the system, questions could still be asked about the differential between the pay of those at the top of organisations and those lower down. It is, however, surely worth considering the question of job satisfaction. It has been shown that the happier people are within their job, the more satisfied they are likely to be. That could be seen as a pellucid statement of the obvious, but the interesting issue is what factors contribute to job satisfaction. Pay is clearly one of them, but there are others, such as a sense of involvement in the work, and the relationship with one’s bosses.
Sources of satisfaction
From my own experience, I can certainly vouch for the fact that in the various jobs that I have done, my satisfaction has come from believing in the value of the work, having good colleagues, and having a high regard for the organisations that I worked for. If the pay had been terrible, the satisfaction would have disappeared, but given reasonable salary levels, the non-pay factors were crucial. (The logic of this, it could be argued, is that bonuses should be paid to people doing dull jobs but somehow I don’t think the bankers are basing their case on the dullness of their work!)
Of course my question about concentrating on pay rather than bonuses is not as simple as I have suggested. Nevertheless, I do feel that there is a case for looking at the bonus issue in principle, not just in the light of the current international financial crisis.
(Incidentally, if you seek precedents for the “fair day’s wages for a fair day’s work” far earlier than Engels, you could do worse than read the parable of the labourers in the vineyard in St. Matthew’s Gospel.)
Bill Kirkman is an Emeritus Fellow of Wolfson College Cambridge, U.K. Email him at: email@example.com