Is Top Team Pay Unfair?
July 9, 2010 in Pay and Reward, Public Services
Photo: Covilha, Flickr
With the government proposing a cap on public sector pay, it can’t be helpful to see reports that, according to reward consultancy MM&K, the pay for private sector Chief Executives has continued to grow while share prices have dropped.
People Management report the total reward for chief executives in the FTSE100 is now £3.1 million a year – consigning to mediocrity the comparisons between public sector managers and the Prime Minister’s salary at a mere £150k.
During a “time of austerity” with public servants experiencing a pay freeze, senior jobholders seeing pay cuts, it is challenging to hear that FTSE100 chief executives pay is up 5% on 2008 figures – at a time when the private sector has been through so much “pain”.
The median 2009 salary increase for this group was 4% and total pay has almost quadrupled since 1998. A quarter of FTSE100 companies raised CEO pay by over 7%, though about a third had no increase or took a reduced salary. The impact on senior managers pay in both the private and public sector cannot be ignored.
During the Radio 4 programme “The Moral Maze”, “Greed, Reward, Worth”, Claire Fox, from the New Economics Foundation, highlighted the unfairness of such high pay, summarising the report A Bit Rich, which challenges the link beween societal value and reward. The HR blog HR Case Studies suggested people reading the report would be either inspired or enraged.
Drawing attention to some very challenging evidence about the impact of work, the report suggests hospital cleaners, waste recycling workers and childcare workers add significant societal value while investment bankers, tax accountants and advertising executives destroy it. The report highlights the discrepancies between this societal value and levels of earnings.
The report could be criticised for using perfect hindsight in the way it describes the destruction of societal value caused by the banking sector. More relevant to the debate on pay is a lack of any discussion about labour markets. In a market economy, people can command what other people are prepared to pay for access to their skills and experience. Broadly it’s the scarcity of skills and experience which drives earnings rather than any careful calculation of “societal value”. Read the rest of this entry →
While bankers pay and MP’s expenses have been in the news regularly, the public sector is now a focus for attention as the scale of financial pressure becomes clear.
Kent County Council plans to “improve motivation” by paying more for superior performance.
