Executive Pay rises 41%, worker pay 1%
Discussion
One in four chief executives at Britain’s biggest companies took home a 41pc rise in total pay, while ordinary workers saw just a 1pc salary increase.
http://www.telegraph.co.uk/finance/jobs/9325216/Pa...
Now before someone tries to justify the pay of these masters of the universe.
The link between pay and firm performance is asymmetric. 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. Take three facts:
- We know from football that changing coaches has no effect upon team performance. If bosses of organizations as small as 11 men can’t turn around performance, what hope do they have for larger organizations? As Warren Buffett said, when a boss with a good reputation takes over a business with a bad one, it is the business that keeps its reputation.
- 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.
source
http://www.telegraph.co.uk/finance/jobs/9325216/Pa...
Now before someone tries to justify the pay of these masters of the universe.
The link between pay and firm performance is asymmetric. 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. Take three facts:
- We know from football that changing coaches has no effect upon team performance. If bosses of organizations as small as 11 men can’t turn around performance, what hope do they have for larger organizations? As Warren Buffett said, when a boss with a good reputation takes over a business with a bad one, it is the business that keeps its reputation.
- 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.
source
London424 said:
The mention of changing coaches has no effect on a club's performance is quite laughable.
On the football tangent:http://www.feb.ugent.be/nl/Ondz/wp/Papers/wp_07_43...
Our first analysis suggests that the shock effect of a turnover has a positive impact on team performance. However, accepting the positive impact of dismissing a coach without controlling for regression to the mean might result in misleading interpretations of the data. We calculated the regression effect and compared these data with the original. The analysis reveals no evidence to attribute the performance recovery following a change of coach to his/her successor and rejects the hypothesis of the effectiveness of coach turnover. The data suggest no impact of coach turnover in the short term. The results give support to the concepts of the organizational learning theory. Supporting the assumption that teams need learning time to improve performance, we would expect that the turnover effect is negative or non-existent. A period of approximately one month might be too short for new coaches to reconstruct the team according to the way they want to play the game.
However if you have Steve Kean as your manager you are f
ked.PugwasHDJ80 said:
3. What? death rate of companies is like species? the death rate of companies is highest in the very first 12m of creation. Are you saying species do the same thing?
you need to click on the links in the source article. Death Rates: http://www.investorschronicle.co.uk/2011/09/15/com...
PugwasHDJ80 said:
That whole papaer only covers teams who are turning over managers very quickly to get short term results.
Not really relevant to the meiudm or long term performance of footie team.
In this paper sport data are used to study the effects of manager replacement on firm performance. Using match results of the major Italian soccer league (“Serie A”) we analyze the effects of coach (manager) changes in terms of team performance. From our preliminary estimates, including year and team fixed effects, it emerges that changing the coach produces a positive effect on a number of measures of team performance. However, this effect turns out to be statistically insignificant once we take into account the fact that the firing of a coach is not an exogenous event, but it is riggered by a “dip” in team performance. Using as an instrument for coach change the number of emaining matches in the season (which is a proxy for the residual length of the coach contract) Two-Stages Least Squares estimations do not show any significant effect of coach change on team performance.Not really relevant to the meiudm or long term performance of footie team.
http://mpra.ub.uni-muenchen.de/11030/
&
"This research examines the impact of manager turnover on firm performance using information from the Dutch soccer league in the period 1986-2004. The main advantage of using sports data is that both manager characteristics and decisions and firm outcomes are directly observable."
http://ideas.repec.org/p/cpb/discus/166.html
Don't think I'm going to get this back on topic.
iphonedyou said:
voyds9 said:
Does it not just spur you on.
I want to be an executive rather than a worker. So I get extra qualifications, work harder make suggestions, generally get noticed.
Seems a far better idea than being at the bottom of the pile and bleating on how well everyone else is doing.
You and your work ethic. Just who do you think you are!?I want to be an executive rather than a worker. So I get extra qualifications, work harder make suggestions, generally get noticed.
Seems a far better idea than being at the bottom of the pile and bleating on how well everyone else is doing.
For what it's worth, I agree. My parents did the same. My kids will do so too.
Hmm, work hard on the factory floor and you'll make it to the board room:
• Social mobility hasn't changed since the 1970s - and in some ways has got worse. For every one person born in the 1970s in the poorest fifth of society and going to university, there would be four undergrads from the top fifth of society. But if you were born in the 1980s, there would be five
• 24% of vice-chancellors, 32% of MPs, 51% of top Medics, 54% of FTSE-100 chief execs, 54% of top journalists, 70% of High Court judges …went to private school, though only 7% of the population do
• Education is an engine of social mobility. But achievement is not balanced fairly - for the poorest fifth in society, 46% have mothers with no qualifications at all. For the richest, it's only 3%
http://www.guardian.co.uk/news/datablog/2012/may/2...
• Social mobility hasn't changed since the 1970s - and in some ways has got worse. For every one person born in the 1970s in the poorest fifth of society and going to university, there would be four undergrads from the top fifth of society. But if you were born in the 1980s, there would be five
• 24% of vice-chancellors, 32% of MPs, 51% of top Medics, 54% of FTSE-100 chief execs, 54% of top journalists, 70% of High Court judges …went to private school, though only 7% of the population do
• Education is an engine of social mobility. But achievement is not balanced fairly - for the poorest fifth in society, 46% have mothers with no qualifications at all. For the richest, it's only 3%
http://www.guardian.co.uk/news/datablog/2012/may/2...
anonymous said:
[redacted]
Those with power in whatever field will use it to feather their own nest, as we with the differnces in pay rises. Would you disbute their is a growing income inequality in the UK? Now if there's a true meritocracy you could argue that's fair enough, but when you look at social mobility that doesn't appear to be the case.If there's no prospect of getting people out of their pit (and if you're born in a pit, the evidence says you are very likely to live an die in that pit) then isn't there a case to say "As the society your born in offers little chance here's a big fat check to make your pit more comfortable".
If you can't make the playing field level, why not compensate those who have the odds stacked against them?
Edited by Fittster on Tuesday 12th June 18:19
KaraK said:
Actually don't we kind of already do that here? So far the anecdotal evidence would sugges that those in a pit who are given random wodges of cash end up massively discouraged to do anything about it.
It might not be a "nice" fact but fundamentally life isn't fair and there is only so far you can go towards redessing that.
Is there any real point encouraging those at the bottom of the heap, when the evidence points out that they have little prospect of getting anywhere? Giving someone false hope is normally considered to be cruel. It might not be a "nice" fact but fundamentally life isn't fair and there is only so far you can go towards redessing that.
At the momement the view appears to be those who are at the bottom are there due to their lack of work/intelligence/initiative/whatever, while those at the top have achieved their position due to hardwork, when a lot of evidence points out that the random luck of who your parents are plays a far greater role in determining where you are going to end up.
At the moment we do redistribute wealth but we aren't very gracious about it. Rather than try an improve social mobility, maybe we should just accept the status quo and stop being so pious about benefits and just consider it compensation for the rigid heiarchies in society.
PoleDriver said:
Scenario:-
Company having slight problems. Workforce demand pay rise of 5% which would increase wage bill by £80K.
CEO negotiates down to 2.5%/£40K.
CEO has done well, gets reward of 10%/£10K pay rise.
Shareholders happy with outcome!
Why not distibute the 40K between the CEO and the workforce? That pleases the most people (shareholders and workers).Company having slight problems. Workforce demand pay rise of 5% which would increase wage bill by £80K.
CEO negotiates down to 2.5%/£40K.
CEO has done well, gets reward of 10%/£10K pay rise.
Shareholders happy with outcome!
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