Bankers’ bonuses are in the news and provoking anger. This week the most popular villain of all investment banks, Goldman Sachs, has been lambasted for paying huge bonuses to staff while cutting donations to charities. The bare facts and figures relating to Goldman Sachs are striking.
Goldman Sachs’ staff pay and bonuses for 2010 has been finalised at $15.4 billion, down 5% from 2009, though profits fell more significantly, by 37% from $13.4 billion to $8.4 billion. Goldman Sachs’ mandated charitable giving programme for partners, Goldman Sachs Gives, has been cut from $500 million to $320 million, a fall of 36%. So, Goldman Sachs’ staff see a modest fall in bonuses, but the charitable pot falls much more significantly in line with the decline in profits.
This has prompted some angry comments, for example from the Daily Mail and from Chris Blackhurst, City Editor of the Evening Standard. I wrote a letter to the Evening Standard about this, which you can probably read here in due course. I want to expand on the argument there in this blog.
As I have said many times (for example, here and here), we are not a very generous nation and there are problems around fundraising. One such problem is low levels of giving by rich people. In that context alone, Goldman Sachs’ decision to cut its Goldman Sachs Gives programme is depressing. In truth, the cut in the programme is simply in line with the fall in profits—it represents 3.7% of 2010 profits, basically unchanged from 2009. One could argue that maintaining the same share of profits for Goldman Sachs Gives is fair enough and does not deserve criticism. But contrasted with the more modest fall in the staff bonus pool, it hardly looks generous.
I am not going to enter into arguments about the morality of bankers’ bonuses; others have plenty to say on that. (I am tempted, but will resist…) But I am comfortable lamenting the low levels of giving by rich people.
Some people think bankers should have their bonuses taxed and the proceeds used to support charities (the acevo line). Others think bankers should give their bonuses to charities (the NCVO line).
The puzzle that most interests me is why bankers, with a number of notable and laudable exceptions, are not inspired to give chunks of their bonuses to charities. From both hard and soft data, it is clear this is not happening. Yet many excellent charities would make great use of better funding, particularly as they struggle with cuts in government support. Such a lack of giving is a reflection of the picture across the whole of society, though one feels it more keenly when discussing a slice of the most affluent people in the country.
Part of the answer might be about duty. Perhaps bankers don’t feel a sense of duty and responsibility towards charities and the causes they tackle. I refuse to believe that bankers are less moral than the rest of us; we all seem to feel rather limited duty towards charities, as low levels of giving overall suggest. Rather, I think we have somehow created a society in which the affluent don’t feel connected to, or aware of, the causes that could effectively use money.
Charitable giving is about both duty and, also, opportunity. I worry that both our sense of duty and our awareness of opportunity are diminishing. Somehow, we need to connect wealth with disadvantage in our society so that rich people see what their money can do.
This requires, of course, potential donors to be open to persuasion. I like to think that is the case. I used to work at Goldman Sachs, and have tremendous respect for the people there. I do not think they are less caring or interested citizens than you or me.
It also requires charities to think about how they engage with donors, to seek to inspire rather than harangue them. The fact that the charitable sector’s leadership has nothing to say about how charities can do this—they prefer to assert that bank bonuses should go to charities without offering positive reasons—is depressing. And the endless laments I hear about the poor state of fundraising reinforce the impression that the sector has inadvertently helped create the problems it faces.
According to a report in The Times today (behind the paywall on its website), the UK government is considering some form of league table of banks’ charitable giving. There are formidable obstacles to doing this and I suspect it has not had proper thought within government. (I believe, though, that if such a table was produced properly, it might prove embarrassing to a number of the richest financial institutions.)
That lack of proper thought applies more broadly to promoting charitable giving. The government is now getting to this, and published a consultative paper on the subject shortly after Christmas, but there is very little in that document on giving by wealthy people. This is an important subject that really deserves more attention from government, as it does from charities and banks.
One practical area where investment banks can do more is their matched giving programmes. (In the case of Goldman Sachs, such matched giving sits alongside Goldman Sachs Gives and covers donations made by staff; and partners are free to increase their giving above the fixed pot from GS Gives.) I wrote a blog on this recently. The essence of my argument there is that banks’ matched giving programmes should be better promoted among staff. If we start with this, then we can begin to test whether low levels of giving among the most affluent members of our society is about lack of opportunity and information, or denial of duty and indifference.
I am not giving up hope, but the longer I work in this field the more pessimistic I become. This is both because of the underlying trends in terms of giving, but also the dearth of good thinking, serious analysis and engagement with the issues.
We might get better thinking in due course. In the meantime, Goldman Sachs should do some soul-searching on whether it does enough to consider both duty and opportunity with respect to its own charitable giving and that of its staff.