I met a business associate yesterday for a £15.50 fixed price lunch at Galvin’s on Baker Street. My lunch partner got chatting about executive pay and how this will become a broader reputation issue for companies. Needless to say the conversation and the restaurant service was quite agreeable.
It has been a month since returning from my trip to Australia and even though Obama’s proposal to cap exec salaries have grabbed the public’s attention, the Australian evolution of the story has come a full circle. Telstra’s saga began in November 2007, and is still playing out in the media. That last month Telstra was rated as a poor corporate citizen is not surprising.
Given the relative powerlessness of shareholders to limit a Board’s ability to double salaries and bonuses – what should companies be doing today in the City? Australia, often resorts to regulation to cap executive pays. However, I wonder whether regulation can fully address the outrage felt by citizens and employees.
Part of the problem for many companies is the toboo nature of topic itself: open debate and discussion about your bosses salary is really not an option for most employees. Yet, given the current upheaval experienced by companies, you wonder why Boards don’t consult their own staff about major payouts, before going public?
In my last corporate role I received my highest salary bonus in 2007 (a year in which the company performed well overall). However, my internal department did not perform as well (at least as rated by internal staff members). This is a problem that I posed to my colleagues at the time. What message does it send to the organisation and my department? The performance of a team declines (as rated by the internal survey) yet the bonuses of department leaders increased dramatically? What behaviours are being reinforced in such a scenario? [The parallel with UK Banks, AIG etc doesn't need underscoring here] Whilst I expressed my unease quite openly with the team, the general feeling was that remuneration as a topic was just too thorny to address.
Well, yes, instigating an open debate about remuneration with colleagues is extremely difficult. With external pressure being exerted on companies to confront this issue transparently, I wonder how well-equipped organisations are to have an external “dialogue” with stakeholders – let alone an internal one.
Governments have sensed the public mood and are reacting. How companies address their own discontents about senior manager salaries and performance (it is performance issue – if every well-paid exec did a stellar job we wouldn’t be having this discussion) will become a key determinant relating to individual and corporate reputation moving forward. Companies need to start talking with their own staff, then shareholders, then a broader group of stakeholders.
Filed under: Uncategorized , Corporate Comms, Exec Pay, Financial Crisis
