The Perverse Incentives of Modern Management and Remuneration
How the structure of executives pay packages incentivises behaviour that is ultimately damaging the UK economy.
In this paper, leading City economist Andrew Smithers argues that the way senior management are paid seriously damages the economy and that shareholders appear to have received no benefit from the massive rise in the pay of senior executives.
Whether the major part of senior executives' remuneration comes from bonuses or options, the incentive effect is very similar and the metrics of success by which they are judged are share price, earnings per share, or total shareholder returns. This system has encouraged executives to take more risks than before by cutting costs and holding investment in innovation or productivity down, in order to bolster short-term profits and the company share price, to the serious detriment of the overall economy.
Since 1 January 2019 the average FTSE 100 CEO has earned:
Income inequality in the UK
Wealth inequality in the UK
- The UK tops the millionaire bankers league – but our overall prosperity is distinctly mid-table
The UK has more millionaire bankers than the rest of Europe put together, according to figures from the European Banking Authority. Blog by HPC Director Luke Hildyard for Open Democracy)
- New HPC Director - Baroness Lister of Burtersett joins board
HPC is delighted to announce that Baroness Lister of Burtersett, Emeritus Professor of Social Policy at Loughborough University, has joined our Board of Directors
- Don’t praise the super-rich just for paying their taxes
The new Sunday Times 'tax rich list' is a welcome initiative, but praise for people for merely paying their taxes should be measured - blog by HPC Head of Policy and Research Ashley Walsh for Left Foot Forward