Recently there has been growing disquiet over the disparity in the pay of the people at the top of very large companies and the ordinary workers, and there have been calls for the top people’s pay to be capped at a multiple of the company average.
But in the private sector there is probably a general acceptance that if a company is doing spectacularly well then it is fitting for the people at the top of that company to earn spectacular pay. And then there are the companies which are not doing particularly well, which need a particular set of skills to turn them around who have to pay big money to attract those with the skills and appetite for risk, and then have to reward success with decent returns.
All in all bonuses are quite an effective way to generate performance.
But then there are some areas which are greyer. There was a great deal of anger over the huge bonuses that a large number of bankers were receiving prior to the economic collapse of 2008, because it turned out that the bankers were not successful after all, in fact quite the opposite, and many others had to pay for it in a very literal sense. And post the collapse the subject of bankers bonuses became a political football, particularly here where two of the banks became part-owned by the state as they were bailed out. The industry claimed that because banking is an international marketplace and therefore they face competition for the very best from banks around the world, and any tying of hands in this country over bonuses would mean an unfair disadvantage and a talent drain to those unfettered over bonus payments.
And now there is further criticism after it was revealed that more than £12 million has been paid out in bonuses by public bodies across Scotland in recent years, going to prison chiefs, council workers, NHS staff and public utility bosses.
In the private sector, where banks belong, it is probably right that some go in to it to get rich. But the “ must match private sector” argument for the public sector only really works if money is the sole motivating factor, but who goes in to the NHS or the prison service or local council to get rich? Surely once a comfortable standard of living is assured there are other factors that will be significant motivators for people like helping people, serving society, freedom to innovate, personal and professional development and even work-life balance. Those factors could attract people very suited for jobs, and the public would be better off with them, also in a literal sense. The Scottish Government should persevere in its desire to end big bonuses in the public sector.