Will Hutton on the Co Op pay

It must represent one of the greatest wealth grabs in history. British firms have been the object of a management coup to deliver extravagant executive pay. The argument is that this incentivises performance and drives companies forward. The evidence suggests the opposite. Performance, productivity and innovation across British business are touching new lows. Yet inequality, with all its pernicious side-effects, is at its highest level for a century. This is a bad deal for the economy and society alike.

The virus has now infected the Co-op, one of our greatest retailers, but owned by its members as a co-operative.

They’re trying to find a CEO who doesn’t bankrupt the organisation Will. Something that the Industrial Society could have used.

BTW, does anyone know when the administrator’s report will come out for the Work Foundation?

11 thoughts on “Will Hutton on the Co Op pay”

  1. “Yet inequality, with all its pernicious side-effects, is at its highest level for a century.”

    From The Guardian July 2013.
    “In its annual analysis of the impact of taxes and benefits on consumers, the Office for National Statistics said that in 2011-12 the gap between rich and poor was at its narrowest since 1986, measured using the internationally recognised Gini index.”

  2. Thing is, Tim, is that large and medium sized companies really do end up being run for the benefit of management rather more than any other mixture of customers, shareholders, and employees.

  3. I’d normally consider it’s the pinnacle of irony when a 1%’er journalist witters on about inequality, but that’s got to be topped by one bemoaning about productivity and innovation, particularly from a newspaper that aligns itself with religious and political ideologies that are anything but.

  4. &Alex

    It’s an article of faith at the Guardian that inequality is at its highest level for decades otherwise their entire shtick about neoliberalism, austerity designed to hit the poor hardest, nasty bankers, Bullingdon types running the country, wholesale tax avoidance at the top etc just doesn’t make any sense.

    The fact that their perfectly sensible business pages publish the ONS and IFS statistics that disprove these inequality claims just doesn’t register.

    PS

    They may have a point if they just stuck to fact that CEOs now get paid a substantial multiple of their lowest/median paid employee.

  5. Bloke in Central Illinois

    I assume that Andrew Miller will be distributing his extravagant £800K salary to less fortunate Guardian employees to strike a blow against inequality. Right?

  6. To me perhaps the biggest problem is that a good CEO makes pretty good money, and so-so CEO makes pretty good money, and a really bad CEO makes pretty good money. There certainly are rewards for performance, but it appears almost no downside to poor or rotten performance, so what’s the incentive to be a good CEO ?

    On that basis I do believe that top management are generally grossly overpaid, and by that I mean that in general if their salaries and benefits were cut to around 20-25% of whee they are we might even see an improvement in performance.

  7. The problem is, bad CEOs only tend to be identified once things are fucked up beyond all reason. 3 years ago, Paul Flowers was described in a board performance report as Mr Awesome.

    Part of the problem may be that over the short/medium term, companies can out-compete their competitors by making bold and imaginative decisions. But the economy is a highly uncertain environment, so it may take considerable time to discover which of those bold an imaginative decisions were, in retrospect, batshit insane.

    He who does not speculate does not accumulate. He who speculates will inevitably, given sufficient time, lose his shirt.

  8. So Much for Subtlety

    Ian B – “The problem is, bad CEOs only tend to be identified once things are fucked up beyond all reason. 3 years ago, Paul Flowers was described in a board performance report as Mr Awesome.”

    But he probably was Mr Awesome until about three years ago. The Peters Principle is at work – people get promoted until they are in over their heads. He could have done brilliantly until such time he didn’t. Or he could have just been the far end of the Normal Distribution – someone will toss a coin twenty times and get heads every time.

    “Part of the problem may be that over the short/medium term, companies can out-compete their competitors by making bold and imaginative decisions. But the economy is a highly uncertain environment, so it may take considerable time to discover which of those bold an imaginative decisions were, in retrospect, batshit insane.”

    As you see with take overs. People often confuse hyper-activity with good policy. So CEOs like to take over other companies – all sorts of ways of muddling the figures to make it harder to see if value has been created. Take overs almost never do produce better value as it turns out. Enough that it may make sense to ban them. But it may not be the take over, it may be the CEO who is determined to make a mark, but doesn’t know what else to do.

    What I think most people miss is that most small businesses also fail. Small companies become big companies because of a combination of good sense, hard work, luck and good timing. It shouldn’t be a surprise that most big companies will fail in the end either. What we need to do is keep creating new small, medium and big companies so that there is someone to carry on when the others do fail.

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