Sir Philip Hampton shows ethical leadership or perhaps cautious pragmatism

April 11, 2012

Future Manyumba

Royal Bank of Scotland Chairman Sir Philip Hampton [right] turned down a £1.4 million bonus in January. Was it evidence of a ‘wind of change’ or a self-saving political statement?

On the 28th of Jan this year, Sir Philip Hampton announced that he would give up his £1.4 million bonus as Chairman of Royal Bank of Scotlan. Few people may disagree with his actions, accepting that the RBS team is doing a tough job. Indeed some would question why he should take such a personal sacrifice when his colleagues in the private sector are still getting astronomical bonuses by comparison.

Frontline leadership

The decision was symbolic in nature. His actions could prove to be a watershed moment in the history of the finance sector in the UK. Sir Philip Hampton has previously held successful positions with Sainsbury plc (chairman), Lloyds Banking group plc, BT group, British Gas and British Steel.

As the head of a bank which is 83% owned by tax payers, public opinion is something that bears a strong influence on decision making. What does it say when bank executives pay themselves huge bonuses when in essence the shareholders (tax payers in the case of RBS) are having to bear with the pains of the Government’s austerity measures?

Decision Dilemma

Sir Philip Hampton demonstrated restraint by example, demonstrating the subtle and pervasive powers of symbolic leadership. He faced the dilemma of either taking the money or suffering personal loss and alienation from fellow executives in the banking industry. Accepting the money at a time when the bank is cutting jobs (cost cutting measures) would have made him look hypocritical but giving it up risked demoralising other executives (within RBS) who ultimately may feel pressured to emulate him. I believe that his choice sent out a compelling ethical view point for business and industry.

The force of sacrifice

Within days of this action, the RBS CEO, Stephen Hester decided to emulate his chairman (some may say he was left with no choice). Within a week, executives of Network Rail also decided to forego their bonuses . Through his ethical symbolic actions, Sir Philip Hampton may have started a chain reaction which is going to transform the banking and private businesses landscape. The momentum is building with politicians and business community now calling for a public debate about the morality of executives’ bonus scheme during tough times.

Challenging times – Adapt or Die

A leader does not necessarily have to ‘stay the course’ just because it is his/her natural style but has to have the flexibility to adapt to the changing times.

Hero or Villain?

It is difficult to see the actions of one man changing the bonus culture of banks in the short term. However, his actions have shown participative and visionary leadership likely to have momentous influence in the long term. He has chosen to make his actions congruent with his beliefs. Now he can stand up and talk about the need to cut bonuses of bankers with moral authority.

Acknowledgements

Future Manyumba, a LWD subscriber, is originally from Zimbabwe, and is a Process Engineer with training and experience in hard rock mining in Southern Africa (gold, nickel and copper). His interests include geopolitical global issues, leadership and football.

Image of Sir Philip Hampton is from the RBS website.