The Great Pay Divide – C-Suite vs those on the ground floor

I watched a dispatches programme the other night investigating the morality, fairness and commercial impact of the ever-increasing c-suite salaries vs those on the ground floor of companies across the UK and abroad. At present chiefs of British business are taking home average pay of £4.8million, 180 times more than the average working wage.

I will start by saying that I believe that people should be rewarded for hard work and success, but within reason.

It got me thinking can someone really be worth that much money? Or is that the wrong way to look at it?

The argument from the c-suite was that they have to pay the going rate and what the market dictates. Just like the astronomic wages that footballers receive for kicking a ball around a piece of grass for 90 minutes, so do the large corporates in order to get their person. It amazes me that the stock market in general can have such a dramatic impact on share prices also. The announcement that Steve Jobs was to return to Apple after years out of the business generated massive share price increases while the firing of a CEO can also help stop the rot on a companies share value.

The argument from down stairs (aside from the obvious) is generally that if you could bring down the top earners pay, you could use this to support employees pensions, invest in those of the future, become morally more respected and help regenerate the entire UK economy. Recessions are, to a degree, psycological…if you could put £100 more in each employees pay packet they would feel better about their financial circumstances and start to ease those purse strings; net effect the wheels of Economy GB start to turn again.

The real kicker for me is that the remuneration packages agreed for new CEO’s and the like are agreed by fellow CEO’s, if you or I were to be held responsible for setting the reward package for our friends then we can see where that would end up can’t we!?

There is a small, but growing movement that remuneration for top execs should be spread over a longer period of time and related directly to the performance over that period. Just like the insane pay packages that a football manager gets after 3 weeks in the job before being sacked for poor results, the same generally applies in business. This would ensure that those people who are brought in, perhaps to save a company from bankruptcy, or to expand internationally and make a success of it are justly rewarded, but those who fail are not.

Dispatches also made the point that we can all have our say. There have been a few cases recently where groups of shareholders have voted against proposed pay increases for some of the UK’s blue-chips top execs and succeeded…perhaps this is something we will see more of as the general public wants to see not just a financial return on their investments, but a moral return also.

As a final point, Dan Pink makes the point that we should try to get to a position where pay is taken out of the equation when it comes to work. Pay people enough, that they are not simply motivated by money and you will find that people feel under less pressure, perform better and enjoy their work more.


4 responses to “The Great Pay Divide – C-Suite vs those on the ground floor

  1. A lot of people think the top executives are compensated too much. What do you think? Do you really think, executives like Warren Buffet and Steve Jobs shouldn’t be paid in 8 figures? When Steve Jobs came back to Apple, Apple was at the brink of bankruptcy. People were counting the days of it going out of business. He was one of the key factors that turned the company around. If an executive can bring in billions of profits for the company, who cares he or she is paid in 8 figures? I’d say make it 9 please. When they couldn’t bring in the profit, they would lose their job – just like us when we don’t perform. I really don’t see the problem. Let’s say you are paid at $8/hour while your company’s top exec is paid in 8 figures. What rights do you have to complain? If you aren’t a shareholder, how is that even your business? You agree to do the work for $8/hour. They didn’t force you. If you don’t like the pay, either ask for more or walk. Do you really think you can do their job? Do their work not create more value (profit) for the company? If somehow you are promoted to the CEO’s level where you can make 8 figures, how long would you think can last?

  2. Thanks Silver Price for commenting, appreciate your thoughts.
    As I stated in the piece, I don’t disagree with CEO’s being paid considerable amounts of money, but over a period of time and linked with the performance they generated for the business. The Steve Jobs of this world and few and far between and I would suggest that “in general” the average base renumeration for CEO’s is perhaps too high and not linked close enough to what they actually bring to the company…even if they fail they still get a golden parachute and land on their feet.

  3. Thought provoking article. I’m generally of the view that the free market should set prices and wages. So theoretically the CEO would get paid what they are worth, as does the basic waged worker. However, in Banking for example, there is no free market. They are getting big pay packets and healthy bonus for running very sick businesses. My value around fairness cuts in and I say somethings up. If a bonus is given for excellence or over achieving, then shouldn’t there be a claw-back of bonus when they screw up? Now that would motivate the top boys and girls to be on their ‘A’ game wouldn’t it? And as to the argument that top business talent will go overseas or leave their company if they don’t get the max. possible salary and bonus… One) What does that say about their character and loyalty? Two) Is the market for CEOs REALLY that liquid?
    Enjoyed this article though Matt, nice one. Regards, Thor Holt.

    • A claw-back….love the idea of that Thor. To that end I guess you would have to drip feed the reward over a period of time, kind of like how companies do share options for staff bonus…well thats what I use to get at HSBC. If the share price did not perform over the period agreed then they would defer the payment until the share price got to the trigger point.

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