Executive pay: should the government follow the private sector's lead?

[scorza]

http://www.bbc.co.uk/news/business-16786632

Very interesting quotes from the EasyJet founder in response to a controversial pay package put forward by the company's directors:

"These guys (the directors) are welcome to resign anytime.

"I know as shareholders we could easily replace them with talented executives and experienced non-executive directors who will cost half as much in bonuses," he said in a statement.

...

"We must take a stand against directors who seem to regard our company as their personal piggy bank to be dipped into at will. The gravy train of £180m free shares issued over the last decade must come to an end now.

"Simply put if shareholders can vote down bonuses at Easyjet then bonuses will come down in all listed companies.

"And that is good for shareholders and pensioners whose pensions are invested in these companies,"

Just seems to be an interesting contrast between the bluff being called here, and the government's stance of being absolutely terrified that the board of RBS will resign if they show any sort of backbone.

On a similar matter, there was a former RBS executive (not Fred Goodwin lol) on the radio on the way home who was defending Hester's bonus saying, "he's entitled to 60% of his bonus because he met 60% of his target". I've no idea how true this is because I haven't actually heard anything about what Hester's targets were, but isn't meeting 60% of a target failing to meet that target? Therefore the bonus was actually another reward for failure?

 

[[TW]Fox]

Scorza, is it true that Hester would have had to pay tax and national insurance amounting to over 50% to the government?

Is it also true that the bonus was in the form of shares which he couldn't sell for 3 years, therefore his real cash bonus is dependant entirely on the performance of RBS?

Is it also true that any gain he would have made through improvements to share price would have been subject to Capital Gains Tax?

Is it also true that this is politics of envy?

 

[Hatter The Mad]

NONE OF YOUR FACTS MATTER. STOP INTERRUPTING

 

[Freakbro]

Scorza, is it true that Hester would have had to pay tax and national insurance amounting to over 50% to the government?

Is it also true that the bonus was in the form of shares which he couldn't sell for 3 years, therefore his real cash bonus is dependant entirely on the performance of RBS?

Is it also true that any gain he would have made through improvements to share price would have been subject to Capital Gains Tax?

Is it also true that this is politics of envy?

What relevance has any of that got to scorzas post?

 

[Werewolf]

I suspect that if the Politicians had pay that was dependent on how well their policies worked 3-5 years down the line (like many directors/chief execs with performance targets), we might get some politicians who aren't simply about winning the next set of elections, regardless of how badly their vote winning policies turn out...

Bonuses may not be popular, but bonuses that pay out effectively after several years do have a major incentive for you to actually do something that works for the company (rather than just something lat looks good when you collect your next normal paycheck).

 

[[TW]Fox]

What relevance has any of that got to scorzas post?

Quite a lot, given the entire thread is motivated by the media attention to this exact issue. Many people think the Hester situation is exactly what needs to be tackled.

 

[King Damager]

I suspect that if the Politicians had pay that was dependent on how well their policies worked 3-5 years down the line (like many directors/chief execs with performance targets), we might get some politicians who aren't simply about winning the next set of elections, regardless of how badly their vote winning policies turn out...

Bonuses may not be popular, but bonuses that pay out effectively after several years do have a major incentive for you to actually do something that works for the company (rather than just something lat looks good when you collect your next normal paycheck).

This.

Monetary incentives work. Well. There are alternatives, but the chances are, people aren't going to take an altruistic reward as satisfactory in a job like banking... Especially considering the hours that most people that high up work...

kd

 

[do_ron_ron]

Is it also true that any gain he would have made through improvements to share price would have been subject to Capital Gains Tax?

The share price threshold will happen when the Greek deal is done and the markets start to stabilise. In other words the share price will recover to the level required when Europe settles irrespective of whether he worked or took a holiday for the next 6-12 months.

Is it also true that this is politics of envy?

It is also true when the rest of the workforce tries to get a small fraction of these rewards the same people scream about 'holding the country to ransom' and other such nonsensical utterances.

 

[mmj_uk]

It is also true when the rest of the workforce tries to get a small fraction of these rewards the same people scream about 'holding the country to ransom' and other such nonsensical utterances.

Well said.

 

[Em3bbs]

We've got to the ridiculous situation where the mere mention of the word 'bonus' gets easily confused people into a flap, no matter how legitimate it bight be. As fox says it's all down to envy at the end of the day.

 

[[TW]Fox]

It is also true when the rest of the workforce tries to get a small fraction of these rewards the same people scream about 'holding the country to ransom' and other such nonsensical utterances.

Can you show us where Mr Heston has claimed the staff of RBS are 'holding the country to Ransom' over any issues regarding pay since he took over?

 

[fez]

I thought that we all already knew this. Top executives in these companies are not the cream of society or our brightest and best. They can all be replaced with people that would do just as good a job for less than half the price.

There is absolutely no justification for paying them the salaries and bonuses that they get other than the ridiculous amounts of money they claim to have earned the banks they work for. That doesn't hold up so well when you have a banking crisis or you realise that they are not the only person in the world that could have made that amount of money or perhaps more given the opportunity.

What I always find amazing is how few jobs there actually are that pay as much as the board of RBS are getting yet they get away with threatening to leave and go elsewhere if they can't have their massive pay cheques. There are not 100's of banks without a board just biding their time until someone at another bank quits.

 

[[TW]Fox]

I thought that we all already knew this. Top executives in these companies are not the cream of society or our brightest and best. They can all be replaced with people that would do just as good a job for less than half the price.

Given that the primary aim of a company is to maximise shareholder value, if it was as easy as you say to pay half the salary and get the same end product, it would be happening already.

 

[scorza]

This.

Monetary incentives work. Well. There are alternatives, but the chances are, people aren't going to take an altruistic reward as satisfactory in a job like banking... Especially considering the hours that most people that high up work...

kd

There isn't actually much evidence to support this. There is evidence that bonuses do work, but only for simple tasks like fruit picking and widget making.

Incidentally, if you're a fruit picker, paid minimum wage but the boss says if you pick 1000 pieces of fruit in a day, they'll give you an extra £10 for that day - if you only pick 600 pieces of fruit, should you be entitled to a £6 bonus?

 

[wannabedamned]

We've got to the ridiculous situation where the mere mention of the word 'bonus' gets easily confused people into a flap, no matter how legitimate it bight be. As fox says it's all down to envy at the end of the day.

Whats legitimate about a £1,000,000 bonus? it's ludicrous. People out there who work day to day, and look for pay increases, or want their pension to go untouched get told no. Yet other companies can afford to throw a million quid at some guy for doing his job

 

[fez]

Given that the primary aim of a company is to maximise shareholder value, if it was as easy as you say to pay half the salary and get the same end product, it would be happening already.

And that guy that you are paying half as much as all the other Executives won't be poached as soon as he is doing well for the bank? You pay them a salary that makes sure that money isn't an issue for them and poaching isn't such an issue any more.

 

[Em3bbs]

Whats legitimate about a £1,000,000 bonus? it's ludicrous. People out there who work day to day, and look for pay increases, or want their pension to go untouched get told no. Yet other companies can afford to throw a million quid at some guy for doing his job

Thank you for proving my point.

 

[fez]

There isn't actually much evidence to support this. There is evidence that bonuses do work, but only for simple tasks like fruit picking and widget making.

Incidentally, if you're a fruit picker, paid minimum wage but the boss says if you pick 1000 pieces of fruit in a day, they'll give you an extra £10 for that day - if you only pick 600 pieces of fruit, should you be entitled to a £6 bonus?

There is plenty of evidence to the contrary in fact. Some might speculate that the ridiculous salaries and bonuses puts extra pressure on executives to make as much money as possible and take risks that they shouldn't.

Most of the accepted wisdom on incentivising your workforce is complete hokum and has been proven to be largely ineffectual and sometimes negative in the pursuit of employee performance.

 

[wannabedamned]

Thank you for proving my point.

And you missed mine. Its not envy

 

[dannyjo22]

Stelios has other motives, he's 'skint' blowing his airline on money on other crap ventures and has tried to stop payments to directors as bonuses as he wants a share dividend for himself. The last director was quite frankly a *** and managed to leave with masses of shares and a payoff. I can understand that frustration.

The current one has got the airline back on track and things have improved greatly under her imo. She helped make the airline it's greatest profits in history despite the fuel cost so for me deserves free shares and bonuses. As does the banker if he's turned things around.

I'm a bit sick of all the jealousy regarding the RBS payout. If he's done a good job he should be paid well after all if he makes the bank appealing again he makes us all money.