Remuneration is a very emotive issue. It’s one I have followed for a long time and my concerns around this have been personally shared with Lord Myners when he did his review many years ago. From Clive Hyman, Chair and Chief Executive of Hyman Capital Services and 528Advisory.
The CEO’s and the Remuneration Committees are bound to game the median pay statistics. However, what is clear is that in too many cases the CEO and senior management team prioritise their own remuneration packages ahead of doing good for the business. If each executive were to lose £1 million of salary, it would enable investment into the business.
There is an acute shortage of skills around growing businesses, and people seem unable to grasp that Profit = Revenue less Costs. CEO and management teams are cutting costs and the fabric of businesses to the bone – the point that customer service is non-existent.
There is a need to also differentiate salary and pay as a cash cost, from benefits where people are awarded shareholding which is then later quantified. If a CEO or Chairman has built the business, like SIr Martin Sorrel has, then as a shareholder he should be benefitting from his vision. These outliers need to be stripped out of the analysis.
The public, of course, do have the power to change all this. There is a need for the lobby groups (or a new lobby group?) to lobby institutional investors and pension funds and grade them as to whether they have stood up to the management. The measure of the gap between the CEO and the lowest paid person is a good metric which should narrow as companies try to improve the returns for shareholders and employees too.
There is little room for large remuneration packages at the expense of employees and there needs to be more light shone on this area. This is why millennials today are finding it difficult to get hired; the “greed” of senior management is preventing the investment required to grow our younger generation.
