Most CEs are high value for cash
DEAR SIR — Bravo for publishing a rare “other side of the story” article, by Andrew Kenny, on the unequal remuneration/high executive pay debate (“Labour laws feed poverty while elite get fat on dogma”, August 3). The din around this issue has been taken up by many academics and unionists, and some journalists and politicians. In all cases, the motivation of these people is populist.
But they are prompted for different reasons — from a nostalgia for the elusive equality advocated by Marxism (but thoroughly debunked by history’s actual events) to anal, moral indignation by people who have generally never shown any entrepreneurship themselves.
Mr Kenny, however, missed one major argument for differentiation in remuneration: that it is justified by reality. International recruitment agent Claudio Fernandez-Araoz, pictured, (in his book It’s not the How or the What but the Who) reviewed research on the difference between typical performers and highly pro- ductive ones. For people in simple jobs (assembly line workers, for example), a “star” worker was about 40% more productive than a typical one. But, he found, the distance between the best and the rest grew exponentially with the complexity of the job. A top life insurance salesman, for example, was 240% more productive than the average one, while standout software developers or consultants outperformed most peers by 1,200%.
His review has been supported by other studies. The implication is that, in reality, a good CE is worth paying a great deal for — not least because they contribute disproportionately to the creation of wealth in society.
All of which is not to deny that there are some top corporate toadies who don’t deserve either their position or their pay.
But at least they are financed by private sector shareholders. And their numbers — totalling perhaps a few score among South African corporate CEs — are insignificant compared to their many equivalents in the public sector benefiting from overpay at the hands of taxpayers.
Those few corporate CEs who don’t warrant their pay don’t justify the populist outcry against high execpay which is, in the main, a reflection of talent and market realities.
Maurice Talbot Sandton