Merryn's Blog

A golden hello that says big companies aren't hearing us

When it comes to ridiculous executive pay, GlaxoSmithKline still doesn't get it, says Merryn Somerset Webb. But they're not the only ones.

16-3-29-Witty-634

They aren't listening. The weekend's newspapers showed the tin ears of the UK's big companies in all their glory. GlaxoSmithKline announced that it is to look for a new CEO and that if the recruit turns out to be an outsider, they will hand him or her share awards to the tune of ten times the basic salary for the job. Last year, the basic salary for the job was £1.09m. How's that for a golden hello?

The current CEO hasn't done badly out of the whole thing either: in the three years to 2015, a period in which the share price did basically nothing, he took home £17.7m in total. You'll be wondering how on earth he managed to trouser quite that much given that renumeration is usually linked to the share price in one way or another (whether that's a good idea or not is another subject). The answer, according to The Sunday Times, is that that's just the way things work at FTSE 100 companies these days.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

Succeed or fail, if you are a CEO, you will end up rich. Examples? GSK's CEO of course. But then there is Peter Sands of Standard Chartered. His share price is down 73% over the last three years. His wallet is up by £16.3m. Then Mark Cutifani of Anglo American. Down 84%, up £12.4m. And Stuart Gulliver of HSBC. Down 17%, up £22.9m. You get the idea.

We know all this is pointless. We know that high pay at these levels doesn't lead to better productivity and we know that it also provides incentives that can be horribly detrimental to the economy as a whole (see my columnson Andrew Smithers's work here). But we also know that the companies and their managers can't seem to hear the rest of us talking.

Advertisement
Advertisement - Article continues below

These levels of pay might lead to more protest voting in the next round of shareholder meetings, but Ashley Hamilton of Royal London Asset Management tells the Sunday Times the companies don't seem much bothered. "Companies are willing to accept a higher vote against them than they used to," he says, "this is the wrong attitude to take". Clearly the nation's CEOs don't agree.

Advertisement

Recommended

Visit/519858/how-long-can-the-good-times-roll
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Visit/517688/the-british-equity-market-is-shrinking
Stockmarkets

The British equity market is shrinking

British startups are abandoning public stockmarkets and turning to deep-pocketed Silicon Valley venture capitalists for their investment needs.
8 Nov 2019
Visit/516758/beyond-the-brexit-talk-the-british-economy-isnt-doing-too-badly
Economy

Beyond the Brexit talk, the British economy isn’t doing too badly

The political Brexit pantomime aside, Britain is in pretty good shape. With near-record employment, strong wage growth and modest inflation, there is …
17 Oct 2019
Visit/511212/reasons-for-investors-to-be-bearish-but-stick-with-the-stockmarket-bulls
Stockmarkets

There are lots of reasons to be bearish – but you should stick with the bulls

There are plenty of reasons to be gloomy about the stockmarkets. But the trend remains up, says Dominic Frisby. And you don’t want to bet against the …
17 Jul 2019

Most Popular

Visit/investments/property/601081/three-things-matter-for-the-uk-housing-market-now-and
Property

Three things matter for the UK housing market now – and “location” isn’t one of them

The UK housing market is frozen. And when it does eventually thaw out, the traditional factors that drive prices will no longer apply. The day of reck…
1 Apr 2020
Visit/investments/property/601065/what-does-the-coronavirus-crisis-mean-for-uk-house-prices
Property

What does the coronavirus crisis mean for UK house prices?

With the whole country in lockdown, the UK property market is closed for business. John Stepek looks at what that means for UK house prices, housebuil…
27 Mar 2020
Visit/investments/commodities/energy/oil/601107/oil-shoots-higher-have-we-seen-the-bottom-for-the-big-oil
Oil

Oil shoots higher – have we seen the bottom for the big oil companies?

Just a few days ago everyone was worried about negative oil prices. Now, the market has turned upwards. John Stepek explains what’s behind the rise an…
3 Apr 2020
Visit/economy/uk-economy/601079/how-the-coronavirus-pandemic-is-killing-cash
UK Economy

How the coronavirus pandemic is killing cash

Covid-19 is making a huge difference to the way we live, work and do business. One of its less obvious effects, says Merryn Somerset Webb, is to accel…
31 Mar 2020