Tuesday, 19 January 2010

Interesting argument on pay...

We've got a review copy of this book at work. It's short & sharp and very sceptical about the idea that rewards in the corporate sector reflect talent. He also spends a bit of time looking at the argument that exec pay, or pay in the financial sector, is comparable to rewards for sports and movie stars.

One good argument he floats here is the 'Faking It' one. Could a fit young bloke who wasn't a professional footballer get away with pretending to be one, as in be able to get paid for such a position? The answer is pretty obviously no. Their lack of genuine athleticism, let alone skill, would be exposed very quickly. But could we say the same thing about people who work in the finance sector? Could we even say it about chief execs?

And there's also the lack of transferability of skills. No-one would expect that a top footballer could simply decide that they want to transfer to the top level in rugby and be able to achieve such a move. Yet executive skills it seems are transferable between industries - you don't need to know the underlying industry.

The suggestions on how to deal with the pay problem are less convincing. But the attack on conventional wisdom about exec pay (as parroted, unfortunately, by many investors) is worth a read. And you can get through the whole thing in a couple of hours.

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