Wednesday, 28 July 2010

The post where I defend exec pay

I think this piece by Tracey Corrigan is basically right. I don't think there is a huge amount to quibble about in respect of Tony Hayward's pay-off, at least anything that is specific to BP. He's getting one year's salary, which is standard. The BP pension scheme has 1/60ths, not rapid accrual like some execs get, so the £600K pension he will get is basically the result of long service (almost 30 years) times high salary. Certainly getting it early and unreduced is a bit galling, but it's not really like the Fred Goodwin case (is Tony Hayward culpable for what has happened to BP in the same way that Fred drove RBS into a wall? I don't think so).

The more important and broader point is whether the level of remuneration on offer in general is justified. As you might expect I think not, in part because I just don't see how one indiviudal can really exercise control over such a large organisation and as such require such rewards. And this is without getting into motivation. But that's a systemic issue, not a BP one.

PS. Hayward's salary is only a bit more than Marc Bolland at M&S.


John B said...

Good post. I mean, all your posts are good posts, but good "justice over ideology" post.

I'm not sure about your 'pay too high' point for Hayward, though. US CEOs get paid insane amounts of money, but Hayward was on about a million a year. BP's annual report says that employee wages were $9.7bn for 2009, and employee numbers were 80,000 - so the average BP employee gets paid $120,000 a year.

If that's the case, then paying the CEO a million squids actually seems pretty restrained, surely?

Tom Powdrill said...

Hi John

I'm just a bit old skool on pay! As you say the US is the outlier, but that doesn't make UK-listed cos restrained IMO. In addition if you look at all the 'performance-related' stuff he was entitled to it comes to over 700% of salary from memory. And broadly I agree with Chris Dillow's line that with large complex organisations it's asking a lot to think any one person runs them, yet exec pay policy reinforces the myth.

That said I posted Bolland's salary as I find it incredible that the head of niche retailer is getting a similar base salary (and plenty more besides) as someone who runs a company that delivers the fuel we all rely on. I don't expect markets -especially for executive 'talent' - to deliver great outcomes a lot of the time, but that really stuck in my mind.