Executive pay: The CEO's view
Nick Atkin, February 20, 2018
There are CEOs driven solely by money, but they are in the minority
It may seem like there’s a bit of a conflict of interest in asking a chief executive to comment on executive pay. That is if you assume (wrongly) that we’re all in it to get as much money as we can.
There are those who are driven by money and whose excessive remuneration packages can’t possibly be justified other than if you live in a parallel universe. But they are in a very small minority. Unfortunately it’s their stories that make the headlines.
The role of executives is to plan and secure the long-term success of any business. While they map the overall direction of the ship, there are many others across the business whose contribution ensures the ship reaches its destination. That’s why there needs to be a link between the lowest- and highest-paid employees in any company. The most transparent and easiest to understand is the multiplier. The commonly-held view is that this should range between 10 and 13.
The actual multiplier used is irrelevant. What is more important is that the majority of colleagues see the value the executive team bring and that they are worth the money they are paid.
There’s an argument that if you don’t pay the highest salary you don’t get the best team. While this is true when recruiting, it is less important once people have joined the business. Research demonstrates how pay increases only drive short-term performance improvements or incentives. While some frontline sales roles may be driven by bonuses linked to targets, for executives this is less relevant. In some cases it can actually drive perverse behaviours.
The bigger attraction for many executives is being in a business that delivers worth. Also key is the wider workplace offer. It’s not all rosy. When things go wrong (as they inevitably do) it is usually the executives that shoulder the responsibility and exit the business. This is often regardless of whether they should have reasonably been expected to have had any knowledge of the issue.
This is indicative of a wider negative culture that has emerged in the UK in the last decade. We build people up and then immediately want to shoot them down. Or when things go wrong we want someone to hold personally responsible.
Is there a simple answer to executive remuneration? No, of course not. But in the words of a famous advert slogan: you have to demonstrate the ‘because you’re worth it’ test.
Nick Atkin is group chief executive of Halton Housing Trust. He is paid £121,000 plus car allowance