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
- Blog: Pay Inequality in housebuilders exemplifies our broken economic system
On Thursday, Siobhain McDonagh, Labour MP for Mitcham and Morden, led a Commons debate on the UK’s ongoing housing crisis on the back of our new High Pay Centre report exposing the shocking scale of pay inequality among the UK’s biggest housing firms.
- Britain’s housing crisis: CEOs at house building companies earning mouthwatering sums
Research shows scale of pay inequality in the housebuilding industry
- Blog: The average CEO-worker pay ratio is down – so are shareholders winning the debate?
The average CEO-worker pay ratio is down – so are shareholders winning the debate against excessive pay?