David McWil­liams

Highly paid chief ex­ec­u­tives make us all feel small.

The Irish Times - Weekend Review - - FRONT PAGE - David McWil­liams

While prop­erty prices in the coun­try in gen­eral are still 33 per cent off their boom-time peak, prop­erty prices in Sandy­cove in south Dublin are only 5 per cent off their 2007 peak. They are likely to pass that peak by the end of this year and con­tinue up­wards.

The ac­cel­er­a­tion of Sandy­cove prices ver­sus the rest of the coun­try is what could be termed the “room with a view” pre­mium. Houses that com­mand a view of the sea or over the city lights have seen their value rocket by more than any­where else in the past few years.

For ex­am­ple, apart­ments in Grand Canal Dock, with views over the wa­ter and across the city, are only 14 per cent off their peak while the rest of the city lags be­hind, ac­cord­ing to Ro­nan Lyons of Trin­ity Col­lege Dublin and Daft.ie.

The prices of sec­ond-hand clas­sic cars and wooden hulled yachts are ris­ing fast too, while ta­bles at ex­pen­sive restau­rants are al­most im­pos­si­ble to get in Dublin, Cork and Gal­way.

Houses with sea views, swanky cars and posh restau­rants are all “brag­ging pur­chas- es”. The eco­nom­ics of brag­ging is all about sig­nalling that the buyer has enough cash and is pre­pared to pay for the sta­tus that th­ese as­sets and ex­pe­ri­ences con­fer.

Buy­ing high-sta­tus goods is not new. Ever since the first cave dweller gave his missus an or­nately carved mam­moth’s tooth, we hu­mans have craved and con­ferred sta­tus via rare things. Beau­ti­ful and scarce items de­liver mean­ing be­yond their in­trin­sic value.

Whale fore­skin

Reg­u­larly the ex­pense is a “willy wav­ing” com­pe­ti­tion among rich men. Stick­ing with willies, did you know that the bar stools on Aris­to­tle Onas­sis’s yacht, The Christina O, were cov­ered with but­tery-soft and ex­traor­di­nar­ily ex­pen­sive sperm whale fore­skin? But this os­ten­ta­tious, and I sus­pect rather mean­ing­less, ges­ture (al­though I have never ex­pe­ri­enced the fris­son of sit­ting on a dead whale’s fore­skin) was part of Onas­sis’s bat­tle to outdo fel­low Greek ship­ping ty­coon Stavros Niar­chos. When two rich men start fight­ing over a tro­phy, all rea­son goes out the win­dow.

This is an ex­treme ex­am­ple, but such po­si­tional spend­ing does cre­ate so­cial anx­i­ety, par­tic­u­larly as we move to­wards the mid­dle classes. The be­hav­iour at the top seeps into the con­scious­ness of those lower down the so­cial scale, be­cause what makes peo­ple anx­ious is not their ab­so­lute level of in­come but their in­come or wealth rel­a­tive to other peo­ple’s.

It is the con­trast in so­ci­ety that is the source of fric­tion. If you feel that you are go­ing back­wards while some peo­ple are mov­ing out of sight, it is nor­mal to feel in­ad­e­quate. This sense of in­ad­e­quacy can trig­ger so­cial prob­lems, where peo­ple feel they ei­ther do not have a stake in so­ci­ety or that their stake is di­min­ish­ing.

And this brings me to the ex­tra­or­di­nary evo­lu­tion in Ir­ish chief ex­ec­u­tive pay and ben­e­fits in the past few years. At the top of Ir­ish com­pa­nies, a winner-takes-all cul­ture has de­vel­oped, whereby the re­wards at the top are ex­tremely high, and the gap be­tween the boss and the av­er­age worker is widen­ing.

Look at the salaries of Ire­land’s su­per­star chief ex­ec­u­tives in the past few years.

In 2001, the chief ex­ec­u­tive of CRH, Ire­land’s largest listed com­pany, earned 50 times more than the av­er­age worker in the coun­try. This ex­tra­or­di­nary dif­fer­en­tial could ar­guably be jus­ti­fied by the strains of the job and the unique skills re­quired to run a large cor­po­ra­tion. But by 2016, the chief ex­ec­u­tive of CRH earned 267 times more than the av­er­age worker.

A worker on the av­er­age wage would have had to work for 53 years to earn what the CRH chief ex­ec­u­tive did in 2001, and would have to work for 267 years or un­til the year 2285 to earn as much as the chief ex­ec­u­tive earned in 2016.

Bosses have al­ways earned more than their un­der­lings, but in Ire­land to­day the dif­fer­en­tial be­tween what the peo­ple at the top of some large com­pa­nies have elected to pay them­selves ver­sus what the av­er­age worker earns is pretty much off the scale.

In 2001, the boss of DCC, an­other large Ir­ish con­glom­er­ate that owns com­pa­nies in­clud­ing Flo Gas, earned 33 times the salary of the av­er­age worker. To­day, the boss earns 120 times the av­er­age.

At Kerry, the maker of Ker­ry­gold, the top dog earned 37 times the av­er­age guy in 2001. To­day his in­come is 97 times the av­er­age in­dus­trial wage.

And in Tul­low Oil, the cor­re­spond­ing fig­ure was 21 times in 2001, and to­day the chief ex­ec­u­tive takes home a cool 101 times the av­er­age worker.

Tech­ni­cally and legally, if the share­hold­ers are cool with that, then we shouldn’t worry – it’s share­hold­ers’ money af­ter all. But we should be aware of what is hap­pen­ing be­cause such dis­par­i­ties af­fect us as a whole.

When we get run­away re­wards at the top, the spend­ing at the up­per ech­e­lons of the coun­try sparks a con­sumer spend­ing race. It drives up prices of all sorts of pre­mium goods – like Sandy­cove houses with sea views.

So­cial anx­i­ety

The process is com­mu­ni­cated to peo­ple lower down through prop­erty sup­ple­ments like the one pub­lished every Thurs­day in this pa­per, whose lead story usu­ally fea­tures a high-end, out-of-sight home. It tells us some­thing about the so­cial anx­i­ety the rest of us feel that this out-of-reach gaff is often listed among the most viewed sto­ries on irish­times.com.

Ire­land is not unique. Th­ese trends are global. In the past, this “winner-takes-all” dy­namic was lim­ited to rock and roll and sport, but this has changed. The su­per­star cul­ture is ev­i­dent in lots of ar­eas where rock-star pri­vate sur­geons, celebrity or­tho­don­tists, su­per-star gy­nae­col­o­gists, big-wig bar­ris­ters, and even grind school teach­ers, Pi­lates in­struc­tors and per­sonal train­ers make much more than oth­ers in their field.

The enor­mous gap be­tween chief ex­ec­u­tives and av­er­age work­ers is only one sign of this re­cent trend, but given the amounts in­volved and its im­pact on so­ci­ety, it’s some­thing to keep an eye on.

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