The Great Bonus Brouhaha

How much do you hate him?

How and when did ‘bonus’ become a dirty word?

The social dynamics of fads and fashions are fascinating to observe. Tropes, memes, conventions and taboos spread amongst us like mental epidemics, becoming the norms and zeitgeist of our age. They cloud our thinking, and then moving as one herd, we declare the new norms the law and punish the deviant.

And therein is the danger. Stampeding buffalo inevitably run too far in one direction. When we overreact as a society to some perceived problem such as excessive bonuses, we tend to legislate in haste, and repent at leisure.

A bonus is simply a component of compensation, and compensation in the long run is a market price: what a business pays a person based on what the business can afford, what he could be paid in a similar role, and the minimum required to retain him. Leave the matter alone, and despite the occasional abuse, by and large, fair prices will result.

But we just can’t let alone, now that bonus-bashing is in fashion. At BT, investors rail against the CEO’s bonus. At the BBC, the fact that well-paid execs exist is a scandal. The big story at the London Olympics project is not delays but bonuses. Likewise at this quango no-one has heard of.

More worryingly, the US is enshrining the bonus-envy of the economically-battered masses into law, and the UK government, with an eye to the polls, is predictably pandering mightily to the same trend. Can this end well?