Report from Equality Trust shows how twisted society’s values have become
If you want an example of how twisted the values of our society have got, take a look at the latest report from the Equality Trust. The trust compared the average FTSE 100 CEO's pay package to the average for several other important occupations, without which society would collapse (and the businesses run by FTSE 100 CEOs along with it).
What they show is that Joe Average CEO is paid the same as 165 nurses, who save lives; 140 teachers, who shape the futures of the next generation; 132 police offices, who are asked to put their lives on the line to protect the public; and some 312 times the average care worker, whose quiet contributions regularly go unrecognised.
Now I get that being the boss of a big company is a big job. But those numbers show the pay they are handed for doing it is a nonsense. The values of a society that is prepared to sit back and allow it that are not just out of whack. They’re bordering on sick. The diminishing number of defenders of the status quo – usually those sitting on big company remuneration committees or working for the consultants that advise them – like to argue that such comparisons are unfair.
They’ll tell you that FTSE chief executives are uniquely talented individuals, that the people possessed of their skills are vanishingly rare, and that they have to be paid obscene sums to “motivate them” to do what most of us have to do to the best of our abilities without the prospect of a seven-figure bonus. They’ll also point you in the direction of entertainers or sports people, arguing that their earnings are a more appropriate yardstick.
For a start, I doubt anyone would disagree that professional footballers and entertainers are overpaid and overvalued by society. But it is at least fair to say that the skills of say, Lionel Messi, are very, very difficult to replace. And if you’ve got a dodgy script, getting an A list actor like Jennifer Lawrence attached to your project is probably worth it to you because she will at least ensure that your film opens.
CEOs, by contrast, are eminently replaceable, just as everyone else in corporate life is eminently replaceable. The figures show that. They are, on average, changed after less than five years in the job. However, while bad footballers usually find themselves dropped after a few games, bad CEOs have a tendency to stick around for long enough to cause real damage before they get clipped. All the while getting paid.
Look at the continuing impact of Fred Goodwin’s misrule at RBS if you don’t believe me. Want a more recent example? James Henderson inherited Britain’s strongest bookie when he took over at William Hill. It was in such a state when he was finally shuffled out the door that the board couldn’t find an external candidate willing to take on the job of fixing the thing. There many more who are merely average, but who get paid all the same.
Entrepreneurs take risks. They have to be quick-witted, committed, and clever. Big company CEOs are professional managers, with an army of staff behind them, and a coterie of expensive advisors to call upon before taking any decision.
The larger the corporation is, the more it resembles not so much a business as a big bureaucracy. The CEO’s performance rests on the backs of thousands of employees. I’m not saying that they don’t work hard, and for long hours, but they’re hardly alone in that. I’m a school governor and I can tell you, teachers work insanely hard, including during much of those allegedly long holidays everyone likes to point to when discussions of their workloads find their way into the media.
As I said, something has gone seriously wrong when the average CEO earns 140 times what they earn, or 165 times what the average nurse earns. The average nurse has to be pretty good at their job. If they’re not, people die. But what to do about this? It’s not as if this is the first time the problem has been raised. A report like this one seems to emerge every few weeks, and yet the problem has been getting progressively worse.
Well, one reason why the report’s publication at this time is important is because we are entering AGM season, the time of year when it’s possible to do something to address the problem. The fund managers who look after our pension money, and our savings, are about to get their chance to vote on whether the
current situation is acceptable.
For years they have sat back and waved through ever more excessive packages. For too long they have been part of the disease. However, this year fund manager BlackRock, the world’s largest asset manager, weighed in on the debate, demanding an end to pay packets for top executives that drastically outpace those of ordinary employees. Other money managers have said similar things in recent months.
It’s time they backed their words with action. They are handsomely rewarded for looking after our savings. They need pay due regard to that and become part of the cure.