Posted by: Pete | January 11, 2011

The Cost of Fat Cat Pay

You can’t blame top executives for negotiating themselves great pay deals, but remunerations committees need to remember that businesses need a talented team more than a talented individual.

Ten talented people earning £1m will not only add more value than one earning £10m but they will spread the risk and create a talent culture. Sure, they need to be led and the leader should get more, but it doesn’t take £9m more to manage talented people. Spreading proportionate reward for performance through the entire organisation will create sustainable profits that don’t involve single person dependencies. It also creates an environment in which people believe they can progress, a sort of natural justice for their efforts that looks a mile away when they read what their CEO just got paid for failing!

And the bonus money has to come from somewhere. We’ve all seen the bad decisions; customer service falling apart, branches closing, the organisation shrinking instead of growing. We’re told this is great cost cutting and improves profitability but the reality is that it’s funding fat cat pay at the expense of customer satisfaction and the long term business is being damaged as a result.

Many large organisations are failing to provide share holder or investor value and yet they insist they need to pay bonuses that inadequately relate to performance. Let’s face it, if someone is that good and they know it, they will not only accept a 100% results driven package, they will insist on it.

Executive pay

Fat Cat Pay

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