cautionary-tales-economies-rewards1

Why Such High (and Low) Rewards? Cautionary Tales Across Economies

 

I build on two of my earlier reports on rewards (‘Why Do Managers and Businesses Oppose Minimum WagesHR Matters Magazine, December 2013 Newsletter; Executive Pay: Is It Too High?HR Matters Magazine, January 2014 Newsletter).

The divisive and corrosive issue of top management rewards rarely goes away and the same old thread-bare arguments justifying it are well rehearsed. These include that high pay is due to: market forces, sector, organisation size and complexity, ‘performance’, profits/turnover, etc. Interestingly, low pay is also justified by some of the same criteria!

So, it was useful and insightful that the Financial Times presented a set of reports on this subject on 13 October 2014, as these neatly contrasted the vast differences in rewards between economies. These reports were on page 1, ‘FTSE 100 directors earnings soar 21% amid longest squeeze on staff pay’ and on page 8, ‘State sector company chiefs welcome pay cuts of 60%’.

The divisive and corrosive issue of top management rewards rarely goes away and the same old thread-bare arguments justifying it are well rehearsed.

The first report reinforced the view of managerial ‘Fat Cats’ and grasping executives in the UK, who now earned 120 times the average full-time salary, up from 47 times in 2000. The second report noted leaders of large state-owned enterprises in China faced pay cuts of up to 60 percent with the government imposed pay cap (of Rmb900k) and even those at listed financial companies were paid ‘only’ 50 times as much as the average worker. Indeed, the president of the Bank of China was paid less than 1 percent of JP Morgan’s Jamie Dimon’s US$20 million.

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Free Image Dollar courtesy freeimages.com

Meanwhile, the UK’s (2014) average salary was just £26,500 and hourly ‘Living Wage’ was about £7.75 and £8.80 in London and the National Minimum Wage was between £2.73 (apprentices) to £6.50 (21 year olds), even in the costly South East. Indeed, minimum wages are always hotly debated as ‘unaffordable’ – often by the very same well paid executives, many of whom ‘under-perform’ but still manage to stay or even leave with ‘golden parachutes’ and generous pay-offs.

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Therefore, would it not be interesting to ‘test’ those arguments of market forces, etc by offering JP Morgan’s top job to the head of the Bank of China? I wonder what pay rate would ensue?

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