The Big Lie

The Big Lie

Becasue I'm Worth It?

Becasue I'm Worth It?

First published in Talking Shop with Paul Lewis Daily Echo: Me, Paul Lewis by

‘If you tell a lie big enough and keep repeating it, people will eventually come to believe it,’ said Joseph Goebbels, Nazi Germany’s Minister of Propaganda.

Is there a bigger lie in today’s society than the one that says our business leaders deserve huge salaries as a reward for their efforts? Managers’ salaries are back in the news with the announcement that the income of Chief Executives in Britain’s top 100 companies went up by 49% in the last year. Coming on top of the astronomical rewards that continue to be received by the bankers whose companies got us into the current economic mess, the inevitable question is asked, are these bosses worth it?

This is not to do with ‘envy’, as the defenders of greed often suggest. I certainly have no objection to rewarding people who add value to their organisations. The trouble is, they don’t, according a report by the High Pay Commission. In the years 2000-2010 (before this year’s increases), the average bonus for the boss of a FTSE 350 company has risen by 187% despite the average year end share price going down by 71%. Looked at in another way, from a base of 100 in 2000, earnings have gone up to 224.1 while the value of companies has gone up to 108.2.

Deborah Hargreaves, chair of the HPC, said, ‘There has been a massive growth in what has been termed as performance related pay, yet no such corresponding leap forward in company performance.’ The argument that we need to pay high salaries or risk losing our best managers seems pretty empty when you realise they’re not even that good.

We might simply say more fool these companies if they pay ridiculous money to their managers. The problem is the effect on the rest of the economy. For a start, business salaries are used to set the pay of managers in the public sector. Worse still, if the gap between the rich and the rest grows, the sense of ‘them and us’ is greatly increased. And that’s bad for productivity.

When I was at Southampton General Hospital for a blood test recently, I picked up a union leaflet complaining that while staff were suffering a pay freeze, the chief executive’s annual salary had just been increased by 10.5% to over £200,000. Few of us object if we feel that we’re all in this together but the resentment is huge when staff feel they are making sacrifices while the bosses get richer.

A large income gap is divisive in other ways. The better off are increasingly separated from the rest- they live in their own communities, go to private hospitals and keep fit in private gyms. The gap between rich and poor is now the widest for 40 years. In the days when the gap was not so great, partly because top salaries were still in contact with the average and partly because higher taxes evened things out, we mixed more and shared more experiences.

Does this matter? If we want to have a society that works together for our mutual benefit, it does. If we want businesses to prosper, it does. John Lewis is our most successful retailer, yet, as I understand it, its chief executive earns no more than 20 times the lowest paid staff member and everyone gets the same percentage bonus. By contrast, those 100 top CEOs are earning 113 times the national average salary in the private sector. Another strange aspect of top bosses’ earnings is that 90% is in the form of a bonus. Let’s put aside the thought that, given the poor performance of their companies, their targets must have been so low that the phrase ‘shooting fish in a barrel’ comes to mind. More to the point is why the boss of the company is apparently so lazy and lacking in commitment that he or she needs an incentive to work hard and produce results? No boss of a small business needs such an extrinsic reward simply to do their best.

I am totally in favour of managers with the skills and experience to make a big difference to results getting a bigger piece of the cake. What we business leaders mustn’t forget, though, is that all employees contribute to results and if we want to get the best from everybody, we must not be greedy and overpay ourselves at their expense. Disproportionate salaries, extra bonuses and benefits, even special parking spaces, cause resentment and are a disincentive to commitment, co-operation and hard work.

Owners of small businesses, such as myself, tend to make sure their employees are properly paid first before giving ourselves a reward. But that's because we're more in touch with our staff.

Readers who submit articles must agree to our terms of use. The content is the sole responsibility of the contributor and is unmoderated. But we will react if anything that breaks the rules comes to our attention. If you wish to complain about this article, contact us here

Comments (3)

Please log in to enable comment sorting

10:54am Wed 2 Nov 11

peenut81 says...

How refreshing to hear some one from within the business community pointing out the issue that is most set to tear this country apart soon, we are not all in it together. The richest 1% are continuing to live the highlife, and the rest of us appear to be passively accepting the fate of paying for their mistakes and greed, faith in the free market system with 20/30 years of increased taxes and falling living standards. I would like to call the bluff of these people and up the top tax rate to 90% for 3 years and see which worms flee and how many realise that regardless they don't want to leave London for Mumbai, Dubai or Frankfurt.
How refreshing to hear some one from within the business community pointing out the issue that is most set to tear this country apart soon, we are not all in it together. The richest 1% are continuing to live the highlife, and the rest of us appear to be passively accepting the fate of paying for their mistakes and greed, faith in the free market system with 20/30 years of increased taxes and falling living standards. I would like to call the bluff of these people and up the top tax rate to 90% for 3 years and see which worms flee and how many realise that regardless they don't want to leave London for Mumbai, Dubai or Frankfurt. peenut81
  • Score: 0

11:47am Tue 8 Nov 11

MSK says...

Just why the UK has enveloped David Cameron's 'we're in this together' phrase, I don't know.

Not one nation has shared the riches and poors among its people. Even in a communist state, the richest 1% won't be 'in it together' with the people. So why encompass this idealogy in a capitalist country.

As for CEO bonuses, lets not forget that the UK economy isn't really growing. So for a company to grow at all, for the share price to increase (if only marginly above ONS growth figures) the company is doing rather well. People are still in a job aren't they?

In most cases, paying a CEO much less would damage investor confidence and cause the share price to drop, regardless of how well the company performs.
Just why the UK has enveloped David Cameron's 'we're in this together' phrase, I don't know. Not one nation has shared the riches and poors among its people. Even in a communist state, the richest 1% won't be 'in it together' with the people. So why encompass this idealogy in a capitalist country. As for CEO bonuses, lets not forget that the UK economy isn't really growing. So for a company to grow at all, for the share price to increase (if only marginly above ONS growth figures) the company is doing rather well. People are still in a job aren't they? In most cases, paying a CEO much less would damage investor confidence and cause the share price to drop, regardless of how well the company performs. MSK
  • Score: 0

12:02pm Tue 8 Nov 11

peenut81 says...

Msk, you are assuming share price has any basis in facts. It doesn't, the 'markets' for the most part are in physical reality a group of obnoxious Alpha males with massive cocaine habits who are driven solely by money and praise from their peers for being greedy.
Of course no country has reached equality between all its population (yet) but the trend is reversing the progress made at the beginning of the last century.
Msk, you are assuming share price has any basis in facts. It doesn't, the 'markets' for the most part are in physical reality a group of obnoxious Alpha males with massive cocaine habits who are driven solely by money and praise from their peers for being greedy. Of course no country has reached equality between all its population (yet) but the trend is reversing the progress made at the beginning of the last century. peenut81
  • Score: 0

Comments are closed on this article.

Local Businesses

Echo Bloggers


Recent Entries

I co-own Your Life Your Style the home and gifts shop in the Brooks Centre Winchester which also sells online at yourlifeyourstyle.co.uk. I love running a small business. The headlines go to the companies turning over billions of pounds but nearly half the UK economy is powered by small to medium size businesses. Small businesses lead change and offer a huge range of challenges. Having spent my early working life in retailing, I moved into arts marketing including many years as the Head of Marketing and Operations at The Mayflower Theatre. I still provide marketing and PR support to small businesses. Paul Lewis

September 2014
S M T W T F S
30 31 01 02 03 04 05
06 07 08 09 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 01 02 03

About cookies

We want you to enjoy your visit to our website. That's why we use cookies to enhance your experience. By staying on our website you agree to our use of cookies. Find out more about the cookies we use.

I agree