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 2017 the average FTSE 100 CEO has earned:
Income inequality in the UK
Wealth inequality in the UK
- Full text of joint CIPD/HPC submission to UK BEIS department Feb 2017
This unprecedented joint submission signifies the importance of this moment: an opportunity to make meaningful, lasting reforms to executive pay and boardroom culture and practice
- Joint HPC/CIPD response to government corporate governance green paper
Reform of pay and governance structures matter to all employees. We are pleased to make a joint submission with the CIPD
- Fat Cat Wednesday 2017
Welcome back to work. FTSE100 bosses will have already clocked up an average annual UK salary by lunchtime today.