High branches should be breezy ones

I for one welcome the High Pay Commission’s new report looking at the quite extraordinary remuneration enjoyed by UK executives.  For Directors of FTSE 100 companies pay soared by an astonishing 49% over the last year but just 2.7% for the average employee even as the companies involved have mainly delivered distinctly pedestrian results.  Click here for the report and here for a BBC story).

The traditional justification is that remuneration has to be “internationally competitive” to attract the best talent but this is a theory constructed out of wishful thinking; the notion that there is a liquid market for chief executives is pure self-serving fantasy.  As the High Pay Commission itself notes the importance of global mobility is largely a myth and that, “only one successful FTSE chief executive has been poached in the last five years – and even this person was poached by a British company“.

My own experience leads me to believe that most people can only have one major goal – money or results but not both – after I had the doubtful privilege of working for a chief executive who was transparently only interested in himself.  Under his ‘stewardship’ the company could have gone to hell and would have done repeatedly so were it not for the work of a handful of good people who averted the worst outcomes his negligence might have caused.  At another time I worked in a company with a chief executive who was quite simply out of his depth; every time things got sticky (as they periodically did) he would find it necessary to take an extended tour of our international operations leaving others to sort things out.  Yet he still drew an immense salary and decorated his office with imported handmade wallpaper.  His talent was not executive genius but knowing the right people to get himself appointed.  Plus ça change!

Anecdotes do not aggregate to data, but it is surely significant that, co-incident with the HPC’s report, we get a damming leak on England’s poor performance in the Rugby World Cup.   According to the BBC, “A number of England’s World Cup players were “more focused on money than getting the rugby right“.   Exactly my point!

The bottom line is that many executives are getting paid too much and delivering too little which is perhaps inevitable when they sit in judgement on their own rewards.   I have no objection to high pay per se when it is earned (Steve Jobs for instance) but the quid pro quo for sitting on a high branch should be that it’s a breezy one and easy to get blown off.  It’s time the ground rules were changed to bring order to this non-market and the HPC has some good suggestions to build on.



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