* Corporate pay packages are today extremely high compared to average workers’
* Countries are debating rough rules on executive pay to defeat this scenario
* There are chief execs who take very little pay, but take a lot in terms of stock options, etc.
Romantic novelist Jilly Cooper wrote in 1979 that society divides neatly into two groups: the Guilty and the Cross. She was referring to Britain, but the phenomenon is now global. Corporate bosses with eight-digit pay packages rank among the Guilty. If they want to placate the increasingly empowered Cross, they could tender their services more cheaply – or even free.
So far, the trend has gone the other way. Twenty years ago, the average FTSE 100 chief executive received 1.4 million pounds in today’s money. This has now increased to six million pounds. Martin Sorrell, boss of advertising group WPP, earns 3,000 times the median income of a British family.
The United States just voted in a billionaire as president, so corporate bosses there are probably safe from too much scrutiny. But their European peers might want to act before they are forced to by the sort of tough new rules on executive pay that Britain and the Netherlands are both debating.
They could do worse than copy an American invention: the $1 CEO. That label described corporate chieftains who took a pittance of a salary during World War Two. Today’s company boss could go one better and work just for the love of their job. No pay, no shares, just prestige and the sense of a job well done. Staff and shareholders would be happy, not least because there would be more to go around.
The “Free-EO” should not be confused with those corporate executives, mostly in the tech sector, who already earn $1 or less but take home masses of share options, or own large stakes in their companies.
Tesla boss Elon Musk and Facebook’s Mark Zuckerberg eschew proper pay not because they consider themselves the Guilty but because they are already rich. Deutsche Bank’s ex-boss Anshu Jain advised the company for free after he resigned in 2015, but that was a punishment more than a sacrifice.
Altruism with a catch
Genuine altruism comes with a catch. A chief executive who works for nothing might have no incentive to do more than a mediocre job. But there’s an answer to that too, this time from China. Some Chinese banks in the 19th century used to take executives’ family members as human collateral, to be used as indentured servants in the event of misbehaviour. Then again, any modern executive who takes that package probably doesn’t need such inducements.
(By John Foley, who is a Reuters Breakingviews columnist. The opinions expressed are his own.)