Because we’re worth it….

Wayne Rooney negotiates a contract that could earn him in excess of £200,000 a week. FTSE executive pay has increased by 55% in the past year. Eric Pickles berates the local government “gravy train” and is demanding top Public Sector bosses take a pay cut of up to 10%. Throw in the regular comments concerning bankers pay and bonuses and we are once again playing one of Britain’s favourite pastimes, namely a fascination with top people’s pay.

The British have an interesting attitude to high levels of remuneration. We revel in the glamour of high earning superstars and yet frown on anything that smacks of “fat cattery”. This approach tends to glorify celebrities and demonise business people.

The riches that Cheryl Cole, who is moderately attractive and talented, has accumulated do not provoke outrage. The pay and perks of individuals who are responsible for billions of pounds and thousands of jobs seemingly do. And yet it is well run businesses that create the wealth that enables us to indulge these celebrities.

The BA results are a timely reminder of this. Willie Walsh has had to cope with recession, strikes and natural disasters, yet has managed to deliver profits that were double expectations, and negotiate a major merger with Iberia to boot. To do all that has required prodigious talent and deft footwork, which is more than equal to that of Mr Rooney, yet Mr Walsh will be pulling in considerably less than footballer’s salary, and will no doubt get more negative headlines for doing so (Rooney’s negative headlines have been more to do with his negotiating tactics than the final deal).

Maybe it is because people look at the likes of Cole and Rooney and say, yes, with a little more talent and luck that could be me. They can identify with these superstars in way that they cannot with a talented business person.

What does this mean for Enterprise Britain? Entrepreneurs rarely tend to enjoy high salaries. They prefer to make their money on exiting their business, which is arguably a more realistic measure of wealth created. Indeed as the recent IOD report on director pay shows many directors of small and medium sized businesses are sharing their employees’ pain regarding pay freezes and cuts. However they too are tarnished by the anti business feeling that accompanies stories of high executive pay.

Some top executives packages are clearly excessive, unrelated to performance or ability and deserving of criticism. And yet unless we start to really appreciate top business people and stop begrudging them their rewards we are going to struggle to develop the enterprise economy that will provide the jobs and wealth of the future. Particularly those for footballers and pop stars……

To engage or disengage, that is the question…

Having sat through a thought provoking session on employee engagement last Friday at the IOD West Surrey People Forum, it was somewhat dispiriting to come across a survey in this morning’s paper that, in spite of the fact that their companies have lost on average almost a third of their value, executives at Britain’s top companies earned 10% more than in the previous year. This compares to the overall 3.1% increase that ordinary workers “enjoyed”.

Not doubt these executives will use the “L’Oreal” defence (“because I’m worth it”) to justify their largesse, whilst exhorting their employees (those who are left after the most recent round of downsizing) to buckle down and take one for the company, but to use a phrase that has been much used already in respect of politicians and bankers “they still don’t get it do they?”.

Had they been at my people forum last week, they would have heard from Jonathan Scott of em(ic)* about engaged employees i.e. people who enjoy the work they do and “who unlock their discretionary effort to create a winning organisation”, and the potential of such employees to outperform on sales, growth and profit by 2:1, a compelling business case you might think. However the continuing divide between what bosses say and what they do, as evidenced by the pay statistics above, is much more likely to lead to employee disengagement, which one would think was not what is required in the current climate.

Yes top people will earn, and deserve to earn, more based on the skills and responsibilities that go with their jobs, and entrepreneurs in particular deserve to be recompensed for their risk taking. However too many senior executives, both in the private and public sectors, take no risk and little responsibility in their roles, and it is about time their pay packets recognised this. Chances are that their employees already have…..

Antony Doggwiler
ajd@orchardgrowth.com