We need more revolts against CEO pay

There is nothing pro-business about letting a small group of CEOs take far larger rewards than their shareholders or their staff, says Matthew Lynn.

In many ways, Rakesh Kapoor was not the most outrageous example of an over-rewarded, underperforming chief executive, nor was he the one who most deserved a shareholder revolt to reduce his pay. Over the years there have been plenty more justified examples of greed and incompetence. And yet the decision by the board of the household goods giant Reckitt Benckiser to scrap his bonus for the year, following a scandal at its South Korean unit, may well turn out to have greater long-term significance than most. It is one of the very few examples of a CEO of a major FTSE company suffering financially along with his or her shareholders.

No one can have any doubt that CEOs' pay is a scandal that has been building for two decades, and perhaps even longer. Year by year the rewards for running a major company have grown ever more extravagantly, while the pay of ordinary workers has stagnated, and returns to shareholders have been consistently meagre. Between 2002 and 2013, for example, the average pay of a FTSE chief executive went up by 73%, and yet over that time the index itself hardly moved. Was British business twice as well run over that decade, or was the challenge of managing a big business twice as hard? Of course not.A small group of people have rewarded themselves handsomely, with little regard either for their shareholders or the wider reputation of the firms they run.

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Matthew Lynn

Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years. 

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.