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
- How the Shareholder first business model contributes to poverty, inequality and climate change
new briefing from the High Pay Centre and the TUC
- Maximum Pay Ratios
HPC Director Luke Hildyard's essay published by Autonomy and Verso in 'The New Economy Starter Pack'. Why it's time to rethink income, not just at the bottom of the ladder, but at the top too.
- Blog: We have to stop the demonisation of ‘unskilled’ immigration
Policymakers' hero worship of "skilled" immigration has failed - blog by HPC Executive Director, Luke Hildyard for Left Foot Forward