When the chief executive of a major South African mining house tells the media he deserves his megabucks “remuneration package”, you have to wonder what part of the planet he has been living on.
What was he doing? Not during the trying times of the last year when he was very busy, but before that when things were going swimmingly. Did he, for example, ever read a newspaper? A financial magazine? Did he watch a BBC business programme? Had he not heard of the BP chief executive who said he “wanted his life back” during the crisis of the gigantic oil spill in the Gulf of Mexico? He is no longer with BP.
Maybe that is unfair. Our chief executive could have been too busy even before the messy union business upset his schedule. But, if he had taken a little time to Google “shareholders revolt against managers” he would have found some interesting stuff. For example, the subject of managerial remuneration has recently grabbed the attention of more than 500 000 people.
Those inquiring are not just the usual suspects – Marxists, socialists, labour union members, and others who have swallowed the Hollywood guff about capitalism being the root of all evil. The bulk are ordinary people stunned at the levels of some chief executive pay (sorry, “remuneration”).
With the big investors – pension funds, insurance companies – seemingly, for the moment, reluctant to rock the boat, it has been left to ordinary shareholders to voice this displeasure.
The number of large companies facing embarrassing questions at their annual general meetings (AGM) is growing. Almost half of Standard Chartered shareholders voted against the company’s pay policy. Barclays faced demonstrations at its AGM. One small shareholder was applauded when he accused executives of greed. Memorably he said: “Why do you think you’re worth it? It is jam tomorrow for the investors but champagne today for [you].” A third of shareholders voted against the company’s pay report. When one shareholder tried to justify company actions on pay, he was jeered.
This tsunami of shareholder objections to exorbitant executive pay should always be top-of-mind for any chief executive.
Those on the left of the political spectrum are smelling blood and have fluent and persuasive communicators on their side, with growing influence among the public. One, Will Hutton, with a stinging turn of phrase, wrote recently, “super-salaries have almost nothing to do with performance and everything to do with chief executives keeping up with each other in a status race”.
That might explain our top mining executive’s thoughtless statements about his pay and package. Or does it? Any large company has a human resources department or a public affairs division. They are supposed to advise on such matters as well – public affairs and remuneration policy.
In any major company there should be a crisis communication plan based on worst-case scenarios. There should be regular training on how to react to the media in a crisis. If such plans exist, the question is, do chief executives and board members get such advice and training?
If they do, why does a senior executive in a large company make red-rag statements to reporters that they are worth their massive pay? Are we simply looking at a deadly cocktail of greed, ignorance and arrogance? Is Hutton right?
So far, shareholder revolts are largely confined to British and American firms. The protests may run out of steam when dividends rise. Either way, the issue of executive pay is a wake-up call to those at the top of the corporate pile.
How can any company’s shareholders think it is fine to pay huge sums when the average person, even in developed countries, is finding it difficult to make ends meet? In Britain, the outrage is palpable.
How much worse can it be in developing countries like ours?
Keith Bryer is a retired communications consultant.