Teeth-grindingly enervating piece in the Guardian today, called Nice work if you can get it: chief executives quietly enrich themselves for mediocrity
At the crux of the article's argument is that 25 years ago, CEOs (of FTSE-type companies) generally earned about 10 times the average worker on their shop floor. Today, it is 54 times. And, more to the point, studies and research show that such excessive enrichment is rarely warranted. Or, as the article puts it, "executive enrichment is rarely justified by improved performance".
So how do they keep getting away with it? Shareholder reaction (barring a few high profile cases: GlaxoSmithKline, for example, which is ironically held up as a "justified" rise in this article) has been largely subdued and muted....but these people are failing to live up to the expectations their salary rises set. Frankly, if a CEO improved profits by 25% or share value by 25%, then a pay rise of 25% is probably pretty justified. But when most are between 2 and 5%? It's a curious approach. Perhaps with this kind of research coming on line, those who draw up the contracts (with golden handshakes/handcuffs/pension/payoffs and so on) will hesitate slightly next time....
All of which took me back to various GIB ideas on the subject:
- the Fat Cat Index
- the Mondragon Co-operative
- Top salaries taxed on long-term performance
- 10 ideas for tackling corporate excess
and the optimistic Multiperson salaries
Indeed, the sheer number of ideas on this subject submitted to the GIB would suggest that I am not alone in finding this a subject of bemusement and irritation. I am absolutely FOR rewarding performance, in all aspects of life. But rewarding for failure is no way to run any kind of organisation in the long-term.
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