Directors' pay up 50% in a YEAR
Discussion
Welshbeef said:
Also there is the risk IF for whatever reason the company tanks then the CEO of that company will find it extremely hard to find another role in the future... ie he was commander and chief.
So basically they should be rewarded in case being shown to be no good at a job harms their chances of being hired to do it. A stupid argument for two reason: 1) It doesn't seen to apply to the workforce who would be sacked and told to try something they were good at.
2) Bad directors don't seem to have any problem working again. The bosses of HBOS, RBS, and Northern Rock destroyed their companies. They are still directors of other companies and are still living on massive pay-offs. What other job can you have where you are rewarded for being sacked ?
Welshbeef said:
I believe someone in Reckitt Benkiser did very well
A customer of mine was recently acquired by RB. The first communication I received was a notification to advise me "your payment terms will be amended to 120 days EOM" 
Taking up to 150 days credit from their suppliers might be helping them to do 'very well'...The bosses’ pay con-trick is getting worse. The pay of average FTSE 100 directors rose 49% last year, with the average CEO getting £3.86m.
I say this is a con for several reasons.
1. The link between pay and firm performance is asymmetric (pdf). In good times, bosses’ pay rises a lot, but in bad times, it doesn’t fall so far. In fact, the biggest influence on bosses’ pay is not so much company performance as simply the size of the firm.
2. Big bonuses and performance-related pay are not technically necessary to elicit performance. There’s plenty of evidence that bonuses are sometimes ineffective at improving effort, sometimes actually counter-productive, and sometimes inferior to fines .
3. The claim that bosses must be paid a lot because their pay is set in a global market is silly. CEOs are paid more in the US than UK, and yet few Brits have become CEOs of US firms; one of the very few exceptions was Martin Sullivan who was CEO of, ahem, AIG. Holding down UK bosses’ pay is unlikely to lead to a mass emigration.
4. It’s not even clear that the average boss has much effect upon corporate performance.
Jonathan Haskel and colleagues have found that 80-90% of total factor productivity growth (pdf) comes from plants exiting and entering the industry, rather than from internal productivity growth. This suggests that bosses do less than widely thought to improve organizations’ efficiency.
- The death rate of companies is not only high, but statistically distributed (pdf) in a similar way to that of the extinction of species. This suggests that bosses can no more foresee (pdf) or prevent the demise of their firms than species can foresee or prevent their own extinction. Which suggests that bosses know less than we suppose.
In saying all this, I’m not taking a Marxist view. It was, remember, Hayek who told us that central management was flawed because of the impossibility of aggregating dispersed data.
5. The idea that bosses matter, and must be paid accordingly, plays upon our cognitive biases, such as:
- Fundamental attribution error. We assume that individual must be responsible for outcomes, and downplay the role of environmental or situational factors. So if a firm does well, we attribute its success to management rather than a lack of competition or macroeeconomic forces or just luck.
- Outcome bias. We believe that if something happened, it was inevitable. When a company succeeds, therefore, we look for causes - and the fundamental attribution error directs us to management. We forget that success might be due to luck, or to factors outside management’s control.
- Salience effects. I’ll concede that a handful of managers - Steve Jobs, Jack Welch, Arsene Wenger - can achieve great things. But these are exceptions. Looking at them and inferring that the average manager has great powers is like looking at Kate Moss and inferring that obesity doesn’t exist.
Given all this, you might wonder what the real reason is for bosses’ high pay. Simple. Power. Bosses , generally, might not have the power to create super-efficient high-performing firms, but they do have the power to extract rents from shareholders and workers.
http://stumblingandmumbling.typepad.com/stumbling_...
Or maybe they are brilliant individuals who have increased shareholders returns by 50% and anyone who says different is just envious.
I say this is a con for several reasons.
1. The link between pay and firm performance is asymmetric (pdf). In good times, bosses’ pay rises a lot, but in bad times, it doesn’t fall so far. In fact, the biggest influence on bosses’ pay is not so much company performance as simply the size of the firm.
2. Big bonuses and performance-related pay are not technically necessary to elicit performance. There’s plenty of evidence that bonuses are sometimes ineffective at improving effort, sometimes actually counter-productive, and sometimes inferior to fines .
3. The claim that bosses must be paid a lot because their pay is set in a global market is silly. CEOs are paid more in the US than UK, and yet few Brits have become CEOs of US firms; one of the very few exceptions was Martin Sullivan who was CEO of, ahem, AIG. Holding down UK bosses’ pay is unlikely to lead to a mass emigration.
4. It’s not even clear that the average boss has much effect upon corporate performance.
Jonathan Haskel and colleagues have found that 80-90% of total factor productivity growth (pdf) comes from plants exiting and entering the industry, rather than from internal productivity growth. This suggests that bosses do less than widely thought to improve organizations’ efficiency.
- The death rate of companies is not only high, but statistically distributed (pdf) in a similar way to that of the extinction of species. This suggests that bosses can no more foresee (pdf) or prevent the demise of their firms than species can foresee or prevent their own extinction. Which suggests that bosses know less than we suppose.
In saying all this, I’m not taking a Marxist view. It was, remember, Hayek who told us that central management was flawed because of the impossibility of aggregating dispersed data.
5. The idea that bosses matter, and must be paid accordingly, plays upon our cognitive biases, such as:
- Fundamental attribution error. We assume that individual must be responsible for outcomes, and downplay the role of environmental or situational factors. So if a firm does well, we attribute its success to management rather than a lack of competition or macroeeconomic forces or just luck.
- Outcome bias. We believe that if something happened, it was inevitable. When a company succeeds, therefore, we look for causes - and the fundamental attribution error directs us to management. We forget that success might be due to luck, or to factors outside management’s control.
- Salience effects. I’ll concede that a handful of managers - Steve Jobs, Jack Welch, Arsene Wenger - can achieve great things. But these are exceptions. Looking at them and inferring that the average manager has great powers is like looking at Kate Moss and inferring that obesity doesn’t exist.
Given all this, you might wonder what the real reason is for bosses’ high pay. Simple. Power. Bosses , generally, might not have the power to create super-efficient high-performing firms, but they do have the power to extract rents from shareholders and workers.
http://stumblingandmumbling.typepad.com/stumbling_...
Or maybe they are brilliant individuals who have increased shareholders returns by 50% and anyone who says different is just envious.
don4l said:
There is already a thread running, but it is so badly titled that it is difficult to find.
Mods, lock the other thread, please.
I look forward to the lefties getting agitated.
Don
--
How VERY dare you.Mods, lock the other thread, please.
I look forward to the lefties getting agitated.
Don
--
It was perfectly titled, unless one wishes to pitch threads at those readers of the red top variety..
tomw2000 said:
If an individual in the private sector, has managed to negociate him/herself a deal whereby he/she earns £2.7mil - good on them and it's nothing to do with me.
IF Civil servants, public sector employees are earning big bucks. I wanna know what they're doing.
Funny the BBC is reporting this in this way.
I assume you don't have a pension?IF Civil servants, public sector employees are earning big bucks. I wanna know what they're doing.
Funny the BBC is reporting this in this way.
maix27 said:
bobbylondonuk said:
Top boardroom pay avg of 2.7m for a FTSE 100 company?? What is the big story here?
Managing billions in different markets and handling 10's of thousands of employees worldwide is not a joke. I guess is sells papers and politicians get some free PR.
I think you're missing the point. It's people getting paid more while their company does worse. Managing billions in different markets and handling 10's of thousands of employees worldwide is not a joke. I guess is sells papers and politicians get some free PR.
I'd love all jobs to work like that but they don't. That's the point.
Also, how many extra employees could have been retained (if redundancies have been made) for that 49% rise in salary for someone who clearly isn't running the company well (based purely on the fact that they've had to make redundancies and therefore they've either run the company badly or have lacked the foresight I associate with a 2.7m pay packet).
To increase profitability...why should they employ a british worker at high tax cost when they can employee 3times the people in a low cost market? So making UK redundancies and increasing overall head count abroad still makes profits!!!!
Most of the FTSE 100 companies have large operations in low cost/low tax markets. So UK performance is not a big deal in overall performance stats.
If the overall performance target mentioned in individual employment contracts have been met, then they deserve the total remuneration as promised.
anonymous said:
[redacted]
You really believe that guff?Once on the non exec gravy train, these guys will never be out of work. Many of them are on eachother's remuneration committees, hence the daft rises in director pay when company performance or prospects has not increased.
As I said on the other, perfectly titled thread, it is pretty blatant transfer of wealth from the company owners to the company management and only happens because most shares are held in blocks by large funds. These fund mangagers don't give much of a toss about boardroom pay.
tomw2000 said:
If an individual in the private sector, has managed to negociate him/herself a deal whereby he/she earns £2.7mil - good on them and it's nothing to do with me.
IF Civil servants, public sector employees are earning big bucks. I wanna know what they're doing.
How civil service pay would be worked out using the method practiced by the City executives: IF Civil servants, public sector employees are earning big bucks. I wanna know what they're doing.
The top civil servants in the MOD decide the going rate for the top civil servants in the Health Department.
The top civil servants in the Health Department decide the going rate in the Education Department.
The top civil servants in the Education Department in Social Security.
The top civil servants in Social Security decide the going rate in the Pensions Department.
The top civil servants in the Pensions Department decide the going rate in the MOD.
This is repeated for several years
Any top civil servant who is shown to be no good at his job is given lots of money to be a top civil servant in one of the other departments.
If anyone complains top civil servants in the Pensions Department are useless and on £2.7 million a year, point out that its what the other departments earn and is therefore the going rate for the job.
bobbylondonuk said:
maix27 said:
bobbylondonuk said:
Top boardroom pay avg of 2.7m for a FTSE 100 company?? What is the big story here?
Managing billions in different markets and handling 10's of thousands of employees worldwide is not a joke. I guess is sells papers and politicians get some free PR.
I think you're missing the point. It's people getting paid more while their company does worse. Managing billions in different markets and handling 10's of thousands of employees worldwide is not a joke. I guess is sells papers and politicians get some free PR.
I'd love all jobs to work like that but they don't. That's the point.
Also, how many extra employees could have been retained (if redundancies have been made) for that 49% rise in salary for someone who clearly isn't running the company well (based purely on the fact that they've had to make redundancies and therefore they've either run the company badly or have lacked the foresight I associate with a 2.7m pay packet).
To increase profitability...why should they employ a british worker at high tax cost when they can employee 3times the people in a low cost market? So making UK redundancies and increasing overall head count abroad still makes profits!!!!
Most of the FTSE 100 companies have large operations in low cost/low tax markets. So UK performance is not a big deal in overall performance stats.
If the overall performance target mentioned in individual employment contracts have been met, then they deserve the total remuneration as promised.
To try and respond:
bobbylondonuk said:
Have they done worse or better?
Most FTSE companies have done worse this year; you can tell this because the FTSE is lower than in January. bobbylondonuk said:
To increase profitability...why should they employ a british worker at high tax cost when they can employee 3times the people in a low cost market? So making UK redundancies and increasing overall head count abroad still makes profits!!!!
I was comparing 49% rises in Director pay vs redundancies... not making a distinction between UK/foreign. If you want to make it foreign workers then actually the situation looks worse as you could probably have saved more that 64 jobs by not increasing said director's pay.bobbylondonuk said:
UK performance is not a big deal in overall performance stats
Really?! bobbylondonuk said:
If the overall performance target mentioned in individual employment contracts have been met, then they deserve the total remuneration as promised.
You're assuming that the targets are both worthwhile and have actually been hit. Great post Fittster by the way.
shauniebabes said:
How civil service pay would be worked out using the method practiced by the City executives:
The top civil servants in the MOD decide the going rate for the top civil servants in the Health Department.
The top civil servants in the Health Department decide the going rate in the Education Department.
The top civil servants in the Education Department in Social Security.
The top civil servants in Social Security decide the going rate in the Pensions Department.
The top civil servants in the Pensions Department decide the going rate in the MOD.
This is repeated for several years
Any top civil servant who is shown to be no good at his job is given lots of money to be a top civil servant in one of the other departments.
If anyone complains top civil servants in the Pensions Department are useless and on £2.7 million a year, point out that its what the other departments earn and is therefore the going rate for the job.
Except that civil servants are paid out of money taken involuntarily under threat of imprisonment from everyone. Private sector wages are not. If you don't like the salaries being paid in the private sector, sell your shares, remove your pensions and stop buying those products. It really couldn't be more different.The top civil servants in the MOD decide the going rate for the top civil servants in the Health Department.
The top civil servants in the Health Department decide the going rate in the Education Department.
The top civil servants in the Education Department in Social Security.
The top civil servants in Social Security decide the going rate in the Pensions Department.
The top civil servants in the Pensions Department decide the going rate in the MOD.
This is repeated for several years
Any top civil servant who is shown to be no good at his job is given lots of money to be a top civil servant in one of the other departments.
If anyone complains top civil servants in the Pensions Department are useless and on £2.7 million a year, point out that its what the other departments earn and is therefore the going rate for the job.
shauniebabes said:
anonymous said:
[redacted]
Do they work 100 times harder than say a nurse ? Who, lets face it, wouldn't get a 50% pay rise for increasing the ward death rate.Its not like nurse pay has gotten rubbish since all current nurses became qualified. It is rubbish.
Are you really saying people go into nursing thinking it pays £2.7million a year?
With this new government we have been told we are all in this together and we must take back responsibility. 'We' understand this and we're doing so, but the slime above and below aren't listening. It's like homo DP for the working and middle classes, getting synchro-rammed by a hooded chav and a suited city boy.
maix27 said:
bobbylondonuk said:
Have they done worse or better?
Most FTSE companies have done worse this year; you can tell this because the FTSE is lower than in January. My dividend payments are higher this year than last, so some companies are making more profit.
The markets have been worried about the Eurozone crisis for the last few months, otherwise the FTSE 100 would be above 6000.
Don
--
Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff