In recent years the pay of senior managers in both private and public sector has grown quickly. The New York Times reports that the average pay of a top 100 company Chief Executive is $14m, compared to the average US income of $40,000. The lifetime earnings of a college graduate in the US will be about $2.3m: the CEO of Apple last year – yep, in one year – received share options worth more than $600m. In the UK last year, in a stagnant economy the value of share options available to top executives went up 49%. The Guardian reveals that the pay of Barclays Bank’s CEO is 75 times that of an average employee: in 1979, it was 14 times.
The argument is that we need to pay exceptional amounts of money to attract exceptional individuals, who can make all the difference to the success of companies and national bodies. I think that’s wrong – there are countries in Scandinavia and northern Europe which have not suffered from avoiding this approach. The argument would also have more force if the top jobs were genuinely competitive: if they were, maybe the emoluments might come down a little. It is also obvious that not-very-good executives who fail to achieve worthwhile goals still get their mouths in the trough. Network Rail, anyone ? However, the argument does have a certain logic to it.
However, we learned today that the retiring Chief Executive of RBS will receive a pay-off that could be well over £5m. Even if we believe the idea that you need megabucks to retain and recruit talent, why on earth are we being asked to pay such a sum for someone who is leaving ? It makes no sense in either of the possible scenarios: that he is really good, and we want him to stay (= don’t bribe him to go, then) or he is not very good and we want him to go (= he is not the top talent we want to recruit and retain).