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I listened with interest to Chris Gent on Radio 4’s Today programme this morning. He was on the programme primarily to talk about vodafones latest results, which amount to decreased losses - still due to investment write-offs and downgrades (notably not including the 3G license) - but showing increased earnings. Definitely a company that is at the forefront of the mobile phone industry.

What interested me most, however, was when the interviewer broached the subject of executive salaries. There has been some significant discussion in the media about executive compensation, and “fat-cat” salaries. Most recently, GlaxoSmithKline’s shareholders vetoed the package of it’s directors. He would have received up to £22m should he be dismissed - Rewards for failure were at the root of the issue, and it’s good to see shareholders exerting their authority on such packages.

Gent himself was rightly critical of the British attitude towards success, and I agree with him. If people are able to benefit the company for which they work, they should be rewarded appropriately, as the shareholders see fit. Institutional shareholders themselves should certainly do more to monitor the issue - they hold most of the voting power. Perhaps with consultation exercises with the investors they claim to represent - both pension holders and unit trust managers. The power of the internet could be useful here. But Rewarding for failure is inappropriate. If I’m sacked for screwing up, I don’t expect to be receive a large payout. Why should it hold true to executives? They need to share the risk of their endeavours. Consequently if they live by the sword (Receiving compensation for doing well), they should die by the sword (Receiving none for poor performance). Stick to one measure.

So, on the subject of rewarding success, Gent was right to then point the finger at British Envy. I’d go so far to say it is endemic. As a country we do not appear to like to see people prospering. Perhaps apart from a few, such as James Dyson, Richard Branson and David Beckham, who somehow manage to capture a of entrepreneurship and rags-to-riches which somehow excludes them.

Whilst I personally feel no ill towards people who are rewarded with multi-million compensation packages for success - with delivery - I do feel a sense of unfairness towards those who manifestly don’t deliver any good to society. In this list I’d include the hereditary rich (institutionalised or otherwise, I’d suggest they take a leaf out of Bill Gates’ book), or money-grabbers. I recently read “When Genius Failed”, and the sense of unfairness on rewards for the staffers at LTCM was tangible. The traders wanted all of the riches for themselves, both at LTCM but at Salomons beforehand. It’s an attitude found in much (if not all) Merchant Banking - rewards for the traders and their colleagues, but not for the back-office staff without whom they would be unable to work, who put in as much - if not more - effort in the perceived behind-the-scenes effort of keeping the banks going (EMU and Y2K compensations are still talked about with bitterness)

Consequently I’d very much like to see a wider respect for the successful in society, if it is fairly earnt and for the benefit of the many, not the few. Even if the many is “just” the employees of a firm, rather than the whole of society. The good of society is enforced elsewhere, through taxes and government, but we should all make an effort to improve it in our everyday lives.

So, compensation - if for success - is fine. For failure, it’s abhorrent. Last, and by no means least, the British as a culture should do more to respect those who have succeeded, no matter how it is measured. Here we can learn something from the Americans. And Socrates:

An envious man waxeth lean with the fatness of his neighbours. Envy is the daughter of pride, the author of murder and revenge, the beginner of secret sedition and the perpetual tormentor of virtue. Envy is the filthy slime of the soul; a venom, a poison, or quicksilver which consumeth the flesh and drieth up the marrow of the bones.

This entry was posted on Tuesday, May 27th, 2003 at 11:11 am and is filed under Thoughts. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.