Want to make $500,000 a year? How about getting into the aid business? I interviewed Africa expert and author of The Rift, Alex Perry, earlier this week. Get a job helping to sort out the misery that the aid agencies tell us is Africa, and your package won't come in much below that of a London fund manager's. That's nice for the employee (if not for the donors or the needy). But it epitomises the way the aid industry has become corrupted by money.
As Perry puts it: "If you pay that much money, what kind of person applies for the job? The kind of guy who's interested in a lot of money; not the guy that's doing it out of the goodness of his heart... Combine that with a culture in which there's almost no checks and no accountability (and) you have a guy that messes up in South Sudan, gets promoted, and goes to eastern Congo and makes even more money... It's a systeman institutionalised system."
I suspect the sentiments are familiar.It is all about how money skews incentives. Should an aid worker be well paid? Sure.But not so much that the main aim of aid (doing the basics well and leaving) is forgotten. Should a council chief be paid well? Sure, but not so well that the cost of his pension pot bankrupts local services. Should a fund manager be paid well? Yes. But not with bonuses that give him an incentive to ignore the wellbeing of his end customers in favour of index tracking and asset gathering.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
And what of corporate executives? Should they be paid well? Again, yes. But their packages should not be so huge that they promise the potential to transform the finances of their families for generations to come. Otherwise executives end up doing all they can to hit the targets that will effect that transformation. And who wouldn't?
We are all for money: earning lots of it; making lots of it via our investments; and building the ability to spend lots of it. We love money. But we also know how it skews behaviour. Would VW bosses have allowed cheating on emissions tests if it made no difference to their incomes? Would Glencore executives have borrowed their way to disaster, or US CEOs indulged in endless buybacks to force share prices to bubble levels, if pumping up shares wasn't going to make them rich? We doubt it.
And what of dividends? Dividend cover (which measures the ability to actually pay the dividend) is at a 20-year low in the UK. Boards have bumped up payouts to keep share prices up but they might not be able to maintain these levels for much longer. We've had enough of all this manipulation at MoneyWeek. We're investors too, and we want the firms we own to be run in our interests, not in the interests of their corporate executives.
So we are putting together a MoneyWeek manifesto a list of changes we want and are going to keep pushing for. John has outlined the first four things in this issue. Watch this space for the rest.
-
December 2023 NS&I Premium Bond winners - check now to see what you’ve wonIf you hold money in NS&I Premium Bonds, you can check from today (2 December) to see if you have won in the December prize draw. Here’s how to check.
-
OpenAI – corporate drama unleashed
OpenAI, the firm behind ChatGPT, was in uproar as its boss was booted out, briefly snapped up by Microsoft and then brought back again.
-
Beat the cost of living crisis – go on holiday
Editor's letter As inflation rages, energy bills soar and the pound tanks, what’s a good way to save money this winter? Go on holiday, says Merryn Somerset Webb.
-
How capitalism has been undermined by poor governance
Editor's letter Capitalism’s “ruthless efficiency” has been undermined by poor governance, a lack of competition and central banks’ over-enthusiastic money printing, says Andrew Van Sickle.
-
Don't be scared by economic forecasting
Editor's letter The Bank of England warned last week the UK will tip into recession this year. But predictions about stockmarkets, earnings or macroeconomic trends can be safely ignored, says Andrew Van Sickle.
-
The biggest change in the last 17 years – the death of the “Greenspan put”
Editor's letter Since I joined MoneyWeek 17 years ago, says John Stepek, we’ve seen a global financial crisis, a eurozone sovereign debt crisis , several Chinese growth scares, a global pandemic, and a land war in Europe. But the biggest change is the death of the “Greenspan put”.
-
The wolf returns to the eurozone’s door
Editor's letter The eurozone’s intrinsic flaws have been exposed again as investors’ fears about Italy’s ability to pay its debt sends bond yields soaring.
-
Things won't just return to normal – that's not how inflation works
Editor's letter You might think that, if inflation is indeed “transitory”, we just need to wait and everything will return to “normal”. But this is a grave misunderstanding of how inflation works, says John Stepek.
-
Car hire and the strangeness of the post-pandemic economy
Editor's letter A global shortage of hire cars and unusually high hotel occupancy rates sum up the post-pandemic global economy in a nutshell, says Merryn Somerset Webb, with enhanced demand meeting restricted supply.
-
Why we need to get a grip on our government
Editor's letter Our government is trying to do too much, enacting policies that are destructive to the private sector. It needs to drop the the feel-good nonsense and create policies that lead to long-term wealth, says Merryn Somerset Webb.
