Both Théoden and Denethor take hobbits as retainers, but their relationship to their respective hobbits differ from each other. Merry tells Théoden that he will be a “father” to him, but Denethor’s relationship is more pragmatic or utilitarian: although he is genuinely touched by Pippin’s gratitude for Boromir’s sacrifice and his offer of service, and as Gandalf himself generously recognizes, Denethor effectively uses Pippin to extract information from him about the Fellowship, as Gandalf also astutely perceives. Both men enter into a feudal relationship with their hobbits, a relationship that has mutual obligations, and yet both men, despite their being in the position of lords, default on their responsibilities to their vassals when they dismiss them from their service. Once you accept someone’s service, you cannot then refuse it at will. Merry is therefore in a sense entitled to accompany Théoden into battle, as Éowyn rightly recognizes. Unlike Denethor, of course, Théoden’s dismissal of Merry is at least partly solicitous: he naturally does not want Merry to come to harm. At the same time, it is also neglectful: Théoden is going into battle and (understandably) doesn’t want to be hindered by what he (wrongly, it turns out) perceives as unnecessary and encumbering “baggage.” The irony, of course, is that, in yet another exhibition of Tolkien’s gospel-logic, it is the small and seemingly insignificant Merry who will deal the all-important blow to the Witch King, giving Éowyn the crucial opportunity to destroy him altogether. Like King Lear’s Cordelia, in other words, they are precisely the two individuals most disenfranchised (or at least least enfranchased) by Théoden who render him the most faithful and effective service in the end. Théoden’s lapse in judgment here is to be contrasted with the gospel-logic exhibited, for example, by Elrond at the Council and Gandalf throughout the Third Age, the ingenious and paradoxical strategy of whom, beginning in The Hobbit, is the calculated enfranchisement of the hobbits, exposing them to and including them in the wider affairs of Middle-earth.
Denethor’s treatment of Pippin, however, is far worse. I have already mentioned his using Pippin to get extract information that Gandalf is loath to divulge, but he later disingenuously and hypocritically, even if indirectly, accuses Pippin of being a spy when he tells Gandalf that he has deliberately planted Pippin in his service for that purpose. It is disingenuous, because Denethor knows the genuineness of Pippin’s offer. If anything, Gandalf suffers Pippin to enter Denethor’s service against his own “better judgment,” and in part for Pippin’s own sake, knowing that he (Gandalf) has more to lose or risk than gain by having Pippin so attached and indebted to Denethor:
“I do not know what put it into your head, or your heart, to do that. But it was well done. I did not hinder it, for generous deed should not be checked by cold counsel. It touched his heart, as well (may I say it) as pleasing his humour. And at least you are free now to move about as you will in Minas Tirith – when you are not on duty. For there is another side to it. You are at his command; and he will not forget. Be wary still!”
In this we see something of Gandalf’s own “generosity” and self-sacrifice in allowing Pippin to serve Denethor despite the risk it may mean for Gandalf’s own purposes. So Denethor sees and recognizes the selflessness of Pippin’s offer, only to insult it later when he feigns to suspect it as a plot. And it is hypocritical in that, as has already been pointed out, it is Denethor himself who employs Pippin as an unwitting spy against Gandalf and the Fellowship.