Monday, 30 May 2011

Stating The Bleedin' Obvious.

This BBC article brings to light a report that says top bosses pay is losing the link with the performance of the companies they manage.

Talk about stating the obvious.

Its been obvious for the past decade or more that "performance related pay" has evolved a long way for senior managers and directors of companies into a greedy grab-fest. 

The people to blame are those that agree to and write up the contract terms the people to blame are the shareholders that don't hold those people to account.

But this is the problem with the system. When we have huge institutionalised shareholders that don't take an interest in the day-to-day running of the company whose shares they own as long as they pay a dividend, the situation will continue.


3 comments:

  1. Parliament used to set its own pay and conditions. MPs got a pretty good salary, first class rail travel to and from their constituencies, stamps for their correspondence and 2,500 sheets of paper per year. No second home allowance, no office staff, no pension - unless they bought their own - certainly no money for duck houses and moat cleaning.

    It was in 1971 (after many years of intense contact with continental colleagues in the run-up to joining the EEC) that Parliament outsourced its pay and conditions to something called "The Top Salaries Review Body" and the whole corrupt business started from there. Any organisation which has a "remuneration committee" or similar is setting up a rip off. Commercial firms are no different in this respect.

    One MP stood out against this. He said that the existing arrangements were adequate to ensure that men of ability but lacking private means were able to serve their country in Parliament. He said that the more Parliament offered a pensioned, salaried career, the more attractive it would be and the more important would be the gate-keepers of that career - the party selectors. That would make a fundamental change in the relationship of MPs to their parties and of Parliament to the government - with government and party acquiring hugely increased power. I think this is one occasion when we can say ENOCH WAS RIGHT.

    One prescient chap, Enoch.

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  2. Del, many of the shareholders are vast hedge funds who drown the small individual shareholder. That's the way these companies like it and I would never buy a small amount of shares in large organisations for that very reason.

    I should qualify that by saying 'if I was in a position to do so'.

    ReplyDelete
  3. Its a self-fulfilling spiral with no regulation: Big companies offer big bonuses and remuneration packages that aren't in the interests of the company, but there's no-one to put the brakes on such behaviour, so it continues to spiral out of control.

    Reminds me of the only time I've ever been offered shares: I was working for an American IT company and did such a good job they offered me shares in the company at a knock down price as a thank you. But this was during the recession of the early 90s, so by the time the offer letter had winged its way across the Atlantic, the shares were being sold on the markets at less than the offer price. Such is my luck.

    So as yet I have never been a shareholder.

    ReplyDelete

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