Is outrage over gigantic bonuses justified?

Edit Sunday PM: Looks like the situation is more complicated than I made it out to be; UK taxpayers have a majority stake in RBS: Hester has since refused the payment.


The BBC reported today on public outrage on the one million pound payout for RBS CEO Stephen Hester. A group called the “High Pay Centre” is apparently monitoring compensation in the City, and conducted a survey on both the payout and “crony capitalism.”

Only 2/3s of the people surveyed expressed outrage over crony capitalism. Where are the other 1/3? Perhaps the group is really the 1%-ersĀ  and created some mathematical machination to skew the survey’s results.

What constitutes unreasonable pay? At what figure does the High Pay Centre take notice, and why not more, or less? If a figure, or a range of figures, can be arrived at, it is still not clear why we should be outraged at these decisions. Unless we are already shareholders in RBS and feel this money could have been better invested or wasn’t needed to retain the talents of Mr. Hester , isn’t it permissible for private entities to do what they wish with their capital? Exceptions should be carved out for funds directed towards illegal activities.

The video ends with a note that many do not find that compensation committees determine such bonuses in an open in a transparent way. If the methods and formulas used to compute Mr. Hester’s bonus were publicly accessible, would the resulting figure be acceptable?

Finally, a different kind of anger is directed towards outright frivolity. However, few people support restrictions on spending money in ways that are generally considered silly. Should we also be outraged at Tommaso, the Italian cat, who recently inherited thirteen million euros and two Italian villas? Why is the character of our collective outrage over Tommaso’s payout different than that of Mr. Hester? If the reasoning behind the Italian Heiress’s decision to donate her fortune to the cat is closed to the public and not transparent because of its silliness, shouldn’t we be more outraged than we are at Mr. Hester, whose compensation and performance metrics are clearly seen by any individual interested in looking at RBC’s annual financial statement?

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