I rarely buy the Fin, but this headline caught my eye – No slowdown for CEO pay amid market turmoil.
You can read it here, but it highlights a phenomenon that has become an accepted part of our national business landscape. I’m talking about the complete disassociation between performance and remuneration in the world of corporate managerialism.
As the Fin points out, many of these characters have overseen the bottom fall out of the share price on their watch, but there seems to be a total disconnect between this and the massive money they pull. It's telling that in this country only one third of the top 50 companies are prepared to disclose CEO remuneration to shareholders.
Remind me again how important it is that no ceiling is put on corporate remuneration. The party line goes something like this –
These CEOs must be paid at the top of the scale in order to attract people who improve the company’s bottom line.
You can assume, therefore, that applying the most basic of logic, if the firm is bleeding red, the CEO’s remuneration should also dip. Sorry – doesn’t happen, most of the time.
In 1970, average executive pay at the nation's top companies was 28 times average worker income. By 2005, executive pay had jumped to 158 times that of the average worker.
These are US figures, but not much is different here.
Back in the nineties I was on the board of a high profile charity. My fellow board members were a mixture of medicos, wealthy businessmen (no women) and individuals of influence in the city. There was one (token) person with a disability. We were all pro bono.
This was an eye-opening experience – they were well meaning people, but the culture of the board made me, for one, feel very uncomfortable. It was a culture of entitlement and privileged arrogance. No doubt this culture migrated from the boardrooms of the companies of origin of these people, but it was selfish, banal and cynical. They often spoke about their CEOs, and it came across that CEOs and board members were somehow a race apart, separated by some magical properties from everyone else in the organisation. It had to do with power and privilege, that most unholy of combinations.
Understanding this has helped me to understand why the obscenity of CEO remuneration is maintained, and why it resists with such determination any effort to rein it in.
We hear plenty about performance pay for teachers. I’d be prepared to give it a try, just as soon as it becomes accepted practice for CEOs.