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Executive bonuses and bulging pay packets: are they deserved?

ID-100240533You can’t look at any newspaper or media outlet without spotting a news story lambasting the bonuses/payoff to the executives of some company, somewhere.

But is the media just stirring the pot?

Members of the Institute of Directors believe executives’ payments of large bonuses are the biggest threat to public trust than any other issue. The majority identified with the public’s anger, particularly if an organisation paying huge bonuses was one found to be mis-selling, or guilty of similar wrongdoing.

The same IoD survey found that more than half of its respondents took more reward from building a successful business; financial benefits were, to them, just the icing on the cake.

Simon Walker, director general of the IoD, identifies that performance related pay is a key driver for executives in high positions. However, he says, the performance of some individuals have not matched the bonuses they’ve received.

Are pay gaps getting bigger?

Some business commenters believe that the premise of the big bonus only encourages the risk-taking that contributed to our country’s current economic woes. The gap between what the top guy earns at the head of a corporation against his front-line workers is not closing in these austere times, but widening exponentially.

For example, the head of Next’s pay was 459 times the average wage of a front-line employee. The pay gap at the media company WPP was even larger; the chief executive’s pay package was almost 800 times more than that of the employees.

A maximum wage?

Calls for a maximum wage to sit at the opposite end of the spectrum to the minimum wage gather pace when outlandish pay bonuses hit the news. Opposition claims such a move would be ‘anti-business’.

Justifying bonuses

Barclays chief executive, Antony Jenkins, defended his 2014 £1.1m bonus in the same year the company cut 14,000 jobs and profits were down by a fifth. Jenkins said, ‘I completely understand that I am very well remunerated for what I do. But, I think it is appropriate that I accept my bonus.’ He demonstrated the progress Barclays had made in the two-and-a-half years he’d been at the helm, and the company’s healthier balance sheet. Mr Jenkins insists the bank is now stronger than at any time since the financial crisis, after announcing a 12% rise in adjusted pre-tax profits.

Iain McKenzie: ‘Why not make teachers’ or nurses’ salaries performance-related?’

Iain McKenzie, MP for Inverclyde says, ‘Growth in executive pay, bonuses, and incentive payments has vastly outpaced performance as measured by every indicator in common use. Even if we do accept the need for performance-related salaries, why do we not expect generals and senior civil servants – let alone nurses or teachers – to be paid millions of pounds a year to perform well?’

Iain’s suggestion is to limit executives’ pay to 100 times that of their average employee’s remuneration. He has little support in government, however, appropriately demonstrated by George Osborne’s recent slating of the EU’s move to cap bankers’ bonuses – branding it ‘illegal’. Iain goes on, ‘Reports say up to 80% of the public support government action to end income inequality’.

How do you feel about executives’ bonuses? Would you turn down a large bonus if it was offered? Would you refuse to add bonuses into your contract of employment when negotiating with a new employer? Would you feel guilty about taking a bonus if it provided your kids with a better education, or you a better pension? If you’d turned round a failing, or less profitable, business, wouldn’t you feel you deserved a small stake of the extra income you’d secured?

Let me know your stance in the comment box below.

Angela Sabin is an executive coach and senior practitioner who helps clients with issues in their career, or life in general. Contact Angela on 01302 220021, or via angela@executive-life-coaching.co.uk.

Thanks to Stuart Miles at freedigitalphotos.net for use of the image.

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