At the Adam Smith Institute blog Eamonn Butler makes an interesting observation about people's reaction to the payment of bonuses in investor owned firms and partnerships. He writes,
Staff at John Lewis are looking forward to bonuses totalling £200m this year. Everyone thinks this is wonderful, of course, as John Lewis is supposedly a fine example of a 'mutual', a 'partnership' that is owned by the people who work in the organisation.Is John Lewis a mutual? Mutuals are run on the behalf of their customers, not their workers.
Staff at the Royal Bank of Scotland, meanwhile, are getting bonuses of £576m. Everyone thinks this is terrible, as the banks are thought 'greedy', not to mention mean to customers who want business loans.Why then do we see the different react to the paying of bonuses by the two organisations? Bonuses to bankers are often portrayed as going to people who are just 'greedy', just after the big bucks, while no one seems at all upset by the payment of bonuses to the staff at John Lewis. Why? Butler puts the issues this way:
The RBS bonus pot is just over twice that of the John Lewis bonus pot. But RBS has a turnover around 15 times that of John Lewis, £19.7bn compared to just £1.4bn. In terms of the size of the organisation, therefore, RBS bonuses are pretty trifling.
But it is interesting that a bank can pay bonuses of less than a thirtieth of its turnover and everyone thinks it's wicked, and a 'partnership' can pay bonuses of a seventh of its turnover and everyone thinks it's a national treasure.Butler goes on to argue that the different reactions just shows that the argument is all about politics rather than economic and business reality.