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Tuesday, 31 July, 2001, 09:25 GMT 10:25 UK
Are top managers worth it?
The magazine Management Today found that British chief executives' salaries outstrip those of every other European country by more than £100,000.
While their pay packages have risen almost one-third since the last survey in 1999, the UK's manufacturing employees have become the lowest paid in the developed world during the last two years.
The issue of directors' pay and bonuses has provoked angry scenes at a number of recent annual general meetings, especially at Railtrack and Vodafone.
Are top managers' pay packages justified? Or should there be a clampdown on so-called "fat cats"?
This Talking Point has now closed. Read a selection of your comments below.
With globalisation and hence increased competition, it is sine qua non that the top managers be paid competitive salaries so as to retain their talents, ensure the company's survival and to bring about maximum shareholders' values. We cannot begrudge them their high salaries on the basis that others are getting less. What is needed are capable people who are paid according to their worth. Directors and CEOs can be made accountable through a system of good corporate transparency/disclosure and governance. A company's desire to seek out the best talent through competitive wages cannot be held back purely out of concern for the welfare of the majority. To do so would surely be a recipe for disaster.
This issue annoys me - without the engineers, assemblers, administrators, HR staff, and all the other support people that these companies need there would be no successful CEOs. Yes a company needs good PR and marketing, but without the troops down in the trenches these suits would be "signing on" with the rest of us. What's good for the upper level managers has to be good enough for the rest of the company. Try sharing those big bonuses this Christmas and see how the morale improves, and then the productivity.
I find it particularly disturbing that any CEO of any business should be paid more than, say, the PM or the President of the USA. Whatever their perceived contribution to the economy it hardly compares to the responsibility (e.g. value) of running/leading an entire nation.
I live in the USA where CEOs earn even more and companies generate far more jobs, wealth and tax dollars to be shared among all. When will the British finally understand that it isn't clever to envy success, to begrudge top management their salary instead of working to become a top manager oneself?
If the money was divided more evenly and fairly within corporate structure, I am very convinced productivity and company loyalty will go up. It's astonishing to see how companies are losing millions of dollars and still paying very highly to the top-level management.
Let's not generalize too broadly
about executives; there are certainly
those that deserve every penny
and there are those that are
overpaid 'fat cats'. I personally know
some young people who started at
the bottom and have nearly killed
themselves toiling to get to the
"fat cat" position. There are others, however,
who by virtue of birth of luck fall
into the cash.
At the end of the day, CEOs (the £500K per annum) are a commodity like any other, and are subject to the same laws of supply and demand, just as are primary school teachers and jet pilots and road sweepers. There are no laws stopping anyone from reaching a position of high wealth and salary other than their own abilities. Therefore, complaining about high salaries is a sign of a blinkered, small minded, envious individual.
It is interesting that in the US there is little debate about "fat cats". Investors are more interested in how well companies are managed rather than how much the boss makes. Employees aren't that fussed either - there is the attitude that the person in charge logically gets paid the most - they've earned their crust so let them enjoy it.
Yet again the UK demonstrates its ability to knock personal success and want to bring everyone one down to the lowest denominator.
It's always struck me as odd that you mustn't pay ordinary workers too much or they become lazy and inefficient, but you must pay senior managers enormous sums so they remain motivated and productive. The most disgusting thing about it is, if you look at some of the most highly paid executives they are routinely given vast salaries and bonuses when their companies are doing extraordinarily badly. And definitely worst of the lot is the "golden handshake" where an executive who has been proven beyond doubt to be utterly worthless and a liability to the company is handed a fat cheque to go away quietly. How many of us have the luxury of being able to do a job badly and get paid two years salary to go without a fuss?
I'm an executive for a blue chip and I deserve everything I get. It's tough making business decision like one to slash half the manufacturing workforce in the UK in order to auction off the local manufacturing base and outsource production to a sweatshop in Malaysia while at the same time creating lots of low-paid, low-skill high stress 'Mcjobs' in the service sector over here. As I said I make these decisions every day and I deserve everything I get.
Grant Thompson, Italy
Very occasionally, able and imaginative leaders get to the top (eg John Harvey Jones, Bob Kiley etc). These people add value and I don't think anyone minds them getting rewarded. But in most cases, the fat cats have just time served their way into what amount to sinecures in businesses they don't have any experience or knowledge of - e.g. media executives running prisons! Often their ignorance and incompetence leads not only to the ruination of the business in question but even to loss of life as with the railways.
The vast majority of these people are not hard working visionaries who earn every penny they get. They are expensive and unnecessary parasites who have time served their way into a little tautological circle: Why are they paid so much? Because they're successful. How did they become successful? By convincing people they should be paid a lot!
Senior managers' remuneration should be directly connected with the performance of the company. Those serving the public sector transport, hospitals etc. should have their performance rated not on profit but on the service they provide. It seems that the only people who support high remuneration for managers is the managers themselves. I find the comments of Steve Samuelson offensive as there are several times that I have had to work long and arduous hours and watched the manager go home at the dot of 5pm knowing that I'm getting paid substantially less than he is.
I am not surprised at angry scenes at the recent AGM's such as Railtrack and Vodafone. There is absolutely no justification in crazy fat cat pays and bonuses. This is on the back of ordinary people who invest their hard earned cash which is diminished because fat cats are reimbursed with hefty pay and bonuses. Surely multi million pound packages cannot be justified to any CEO/director especially considering the plummeting stock prices.
The success of a company depends as much on productivity among its "shop floor" staff as on business acumen among its senior executives. I would suggest that senior managers be appraised on the same basis as non-executive staff, with the understanding that their pay and bonuses, if any, will depend on their performance during the previous year. Surely, if a company has performed exceptionally well, the entire workforce deserves rewarding for this? It is personally insulting to those lower down in the ranks, who already may work long hours for little reward, to receive a paltry 1.5% pay rise when those at the top of the tree are showered with performance bonuses equalling their yearly salaries, severance bonuses, share options and pay rises of 20% and up. For these individuals to accept these packages, and then lay off workers in droves while complaining about their heavy tax burden, shows utter contempt for those who must work all the hours available in order to earn a living wage.
No-one seems to have grasped the fundamental fact, that workers make things, and managers decide what to make. Yes, the workers are responsible for profit generation, but without the management, the company has no direction. Products won't improve, new products won't get invested in. The job of managers is to guide the company in the correct direction, and make sure that the workers still have a job at the end of the month. Generally, when things go sour, and companies fail, yes workers loose their jobs, but it is the managers that get pilloried my the media. If things go wrong, it is the managers that end up in court even if they personally have obeyed the law, but someone lower down the chain has ignored them.
Non executive directors and board members are completely different... Would you like to have several hundred thousand pounds for just turning up at board meetings once a month and setting company 'strategy'?
I'm amazed that some people are sticking up for those selfish, self-regulating bloated fat cats who take so much money. So they have to cope with stress do they? Oh dear, poor babies. I suppose nurses, policemen, fire-fighters etc never have to deal with stress do they! We all have it easy, don't we, unlike those poor top managers. Nonsense. Try working in a call centre, with nasty, miserable angry people on the phone to you all day because of mistakes or company policies laid down by the managers. Over-stressed call centre advisors always have to take the flak for a manager's incompetence.
These multi-national companies are simply honeycombed with layers of management, consultants, etc. The people that do the real work are constantly being let go or having wages, benefits decreased. My company (based in UK) sets aside a certain amount in the budget for bonuses, etc. Needless to say our managers keep our bonuses low so their is more for them. I don't even have contact with upper management. My problem is with dim-witted supervisors that make more money than me, but don't know squat.
Angus, Hong Kong SAR
No, they are not worth the money. The problem is that there is a silent conspiracy between big business and the institutional investors which goes along the lines of "you keep silent on the subject of pay and we will ensure that you get special privileges by way of information. It is time that limits were set based on multiples of what the lowest members of staff gets paid.
Fat cat pay is helping to distort the housing market for the rest of us. I earn an average salary but cannot afford the average house. In fact, I'm a public sector worker and I live in London so I cannot afford to buy ANYWHERE. It makes me sick that I have to pay rent to yet more fat cats. I do a worthwhile job for the good of the country - why am I effectively not allowed to live and work in my own capital city?
Pay them in shares - it will give them an incentive to keep the share price high...
OK, you have to pay the money to get the staff, but if there is no competition (Railtrack, Camelot, etc) why do you need to pay so much?
I believe that executives salaries should be based on how the company's shares improve while they're in charge. So if the company does well then the executives get their rewards; if the company fails miserably then the executives will owe the company money.
The market, supply and demand, used to regulate the salaries of the executives, until large companies became more powerful and influential than states. These CEOs are now beyond the reach of legal systems, ethics, governments, regulations and international institutions, not to mention the public. Their salaries are set according to the support and loyalty they give to the members and interests of their own ranks, not their business acumen.
Having lived in the USA recently, I simply cannot believe that US factory workers get better wages than UK factory workers. The conditions and pay in the USA are quite simply an embarrassment to that country. However we do have a problem in the UK with bosses currently getting more pay than they deserve. Perhaps the government could lead by example and not award itself such a large rise next year?
Michael Grazebrook, UK
Whilst one envies the 'fat cat' salaries, spare a thought for the poor guys at the bottom of the ladder. I find it hard to justify what one worker earns in a year the fat cat manager earns in a minute or, at a push, in one hour. Even when these so-called managers do make monumental and catastrophic decisions and are forced to resign from their posts, their golden parachute makes everyone's blood pressure rise even higher. I feel that they are overpaid by a long way and their bonuses infuriate the average worker on the street as they are always made public. The correlation between the fat cat and the average worker has now reached such heights that one must have to sympathise with the worker.
The market does not dictate the salaries of top executives in this country - their almost impenetrable, exclusive old-boy network does. They are little more than the continuation of the aristocratic tradition, wherein the elite is protected against everything, regardless of its culpability. This is not the case in Europe. What seems to bother most people is not how much these cliques are (over)paid, but that they're hiding behind the firm of capitalism.
Keith Wright, Scotland
I'd like to say to Steve Samuelson that it's all very well him earning £500,000 a year, but is he happy? It doesn't sound it, when he says that he works till at least 10pm most nights, and spends his holidays worrying about the company. In comparison, my £20k a year is nothing, but I work hard, out of hours and I am career motivated. I know when to stop though. Managers may have to show more company loyalty but, as they say, 'who wants to be the richest man in the graveyard?'
Instead of moaning about how much money CEOs get, how about moaning about how much money those twits in sport and movies get paid? At least executives have to work their way to the top.
Russell Foster, England
These same executives - who are against flexible working for new parents, who are against cutting our long hours - are in fact damned greedy and just doing what people in power do - abuse it.
The amounts paid to executives are often excessive. There should be a national salary cap and there should be a direct relationship between executive salaries in a company and the number of employees. When an executive gets a pay rise or bonus there should be new jobs created lower down.
Christopher Boomer, N Ireland
They definitely earn far too much for the work they do actually do! Nurses and care workers deserve more for the work they do for a pittance.
The actual salary paid to the big boys is not a problem to me. They have worked hard to get to a certain position and have obviously proven their abilities. However, it is the bonuses that they pay themselves that smack of hypocrisy. If they perform well that year, then excellent. They've done their job and that is all! That is why they are getting paid so well in the first place. Paying bonuses of double their salary is abysmal and totally unfair to the rest of the workforce who will be paid a meagre percentage of their already too low salary for their contribution to the success of a company.
The sums of money being paid to company directors is scary compared with many other people who work just as hard if not harder than they do. When you take into account other perks such as company cars, company travel expense accounts etc, the sums of money are obscene. I firmly believe that some of the wealth being lavished upon the top end of the scale should be filtered down the chain to grassroots workers.
Results and results alone determine whether an individual is worth the money paid to him or her. When an hourly employee fails to cut the mustard - pink slip. When an executive or CEO falls short of the mark - golden parachute. It's a double standard that has done more to erode confidence in the capitalist system than anything else.
Janet Gladstone, UK
It's easy to criticise these people - I guess that is why so many of your contributors do it. However, it's far harder to combine the ability to work long hours, make difficult decisions, have the insight to get things done or persuade other people to get things done. Do these people deserve it? Who knows. But at least they do what they do, rather than moan jealously about the success of others.
Board level remuneration should be decided by shareholders, but on a one person, one vote system. The current system allows the 'old boys' network to reward each other far too handsomely.
"Worth" and "fair" are arbitrary terms. Much envy seems to abound when these terms are invoked. The marketplace determines the value, and the companies could choose not to pay them as much and see what they would get.
Yes, quality management should be rewarded, but so should ALL good workers, and those further down the pecking order rarely get the recognition for their work.
So Steve Samuelson of London, UK, thinks that workers are 'selfish' for leaving at 5pm while he stays until 10. I wonder what his family might say about the extent of his commitment to the office next time they see him, which presumably won't be for a couple of weeks if he's that busy at the office. Being a workaholic isn't big or clever - it's a dangerous psychological condition which requires treatment. And the government's paying money to people who don't even have a job?
Nobody but top management really believes that top management is either competent or hard working. Unproductive posing, play-acting and speaking the American managerese dialect is what they mostly do. Not only are they overpaid, but they are increasingly unaccountable: when Marconi or Marks & Spencers go down because of tragic mismanagement and bad judgement, nothing happens to those in charge, whereas thousands of those least responsible are sacked.
I laugh when I hear executives express their importance in the terms of the generation of wealth. The true generators of wealth in this country - and of the future - are teachers, scientists, engineers. Let's pay them executive salaries and we would all be a lot richer. People would be a lot more innovative, therefore there would be more wealth creation. Executives just provide a service for company shareholders!
Maybe top managers in the UK get paid more than elsewhere in Europe, but it is also a fact that working hours are longer in the UK than anywhere else in the world, except the USA (where managers get paid even more). Seems fair enough to me.
Once again it comes down to a handful of "Haves" determining their own monetary worth at the expense of the "Have nots", who invariably are the ones working themselves into an early grave on the shop floor. Only in the UK would people continue to accept such appalling double standards, left over from the allegedly non-existent class system. Talking of double standards, just how many of these fat cats do you think are male? And what is the equivalent salary for female chief executives? I'm sure there'll be discrepancies there too.
Nigel Bennett, York, UK
Bosses decide what we all get paid; and oddly enough, they tend to feel that they themselves deserve shedloads and the rest of us only merit peanuts. The real issue is who has the power in workplaces; the real solution is worker control.
I'm a senior manager in a top company and I earned over £500,000 last year. I deserve every penny of it. Compared to the selfish workers who quit by 5pm on the dot every day, I stay here until at least 10pm and constantly worry about the business's performance during my vacations and weekends. Even worse, I'm then expected to give almost half my hard-earned money to the government who gives it to people who don't even have a job.
I think it's a swizz, "top" managers do nothing except delegate work and responsibility down to the real people who run the show, the production workers, at the end of the day.
The writing has been on the wall for six months as far as recession is concerned and 'Fat Cat' salaries have been in the news for the past five years. No, their salaries are not justified and yes, there should be a clampdown. However, until Corporate UK changes its outlook on outdated working practices and embraces change instead of burying their collective heads in the sand, we will still be having this discussion in ten years time. British people have never adapted to change very well in the past. In the future it will be imperative.
When British companies are performing as well as others then the CEO's can take the same money as the rest, until then they should take a serious pay cut in order to reflect their companies performance.
J Black, UK
I worked for a call centre in Oxfordshire where there was a great divide between the managers and the workers. The staff on the phones were taking at least 100 calls a day each which, due to the nature of the companies we represented, were very stressful. When morale was at an all-time low, some of the managers agreed to lower themselves to our level and actually try taking calls. One manager was so upset by how a customer had spoken to her she refused to take any more calls and took an afternoon off work to 'recover'. Did the management use this insight to improve our workloads or pay? Nope. They put a colour TV in our smoking room.
The "competitive" argument is always used to justify such inflated salaries as it's believed that we will lose top managers to other countries. However, if only the US has higher salaries, surely this makes a mockery of the argument. In the end, it seems to come down to a small group of (usually privately educated) wealthy people deciding they should be paid increasingly large salaries, well in excess of what one person could reasonably use, and taking absolutely no responsibility for the enormous rises in inequality which are tearing the UK's social fabric apart.
It seems totally unfair that senior managers should be entitled to such large salaries considering the current state of affairs, particularly in the IT/telecoms sector. They hold accountability for the success of the business and their remuneration should reflect this. Even worse is the situation where pay freezes have been forced on general staff yet some senior directors benefit from share option deals worth £Ms.
John Atkins, England
I have two friends who are both managers. One of them is the manager of a very well known record store and gets paid £14,000 a year, and the other is the manager of an IT department who earns in excess of £50k. I can tell you for a fact that the manager of the record store works twice as hard, so where is the justice in it?
For those of us not quite in the same salary league, it is tempting to shout,"what about me?" from the sidelines, as if nobody can be worth so much if I'm not. However, real business talent (that is, the ability to create wealth) is a rare commodity, and the risks are tremendous ... but then, so are the rewards. Let's not knock what we would take ourselves, if only the opportunity came our way and/or we had the wherewithal to pull it off.
Mark Stevens, Denmark (UK citizen)
As I see it salaries are set by supply and demand. The British tradition is to draw managers from a limited elite of "top people", thus carefully restricting supply and keeping the price up. It's probably not as extreme as it used to be, it's no longer extremely rare to make it into the club without a public school background.
It's interesting to note that the UK has the worst paid scientists, engineers and academics in the EU. Small wonder that we have such an uncompetitive industrial base.
It is high time that UK plc invested in the people who actually create the wealth rather than just in those who manage the process. But then again, all the suits are managers.....
There is no justification for the amount of money directors, etc get. They make no real decisions themselves but rely on people below them to provide information for them to make judgements on. The Prime Minister does this, yet he isn't paid as much as the fact cats and he has the fate of a nation in his hands - so why should they get so much. Pass it down the chain guys, then watch the efficiencies really boom !!
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