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.

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.

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.

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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.

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.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.