Wednesday, 26 May 2010

BT unions reject 2% pay offer over £1.6m bonus for Chief Executive

It seems that BT may be joining BA in taking industrial action after the Telecoms giant publishes its annual report today. The report is expected to show increased bonuses for top staff.

The Independent: BT faces strike action over bosses bonuses

So, let’s have a look to see if the Communication Workers Union have any justification for their grievance. Here are the figures:
  • The group recently announced £1 billion in profits for the year to the end of March, which came as a marked improvement on the £134 million loss a year earlier.
  • The 60,000 CWU members at BT have recently rejected a pay offer. The offer was for a 2% pay rise.
  • Chief executive Ian Livingston is entitled to a bonus of up to £1.6 million - two times his £800,000 salary - if all financial targets are met.
  • The group's boss saw his pay frozen in 2009, although he received a £343,000 shares bonus last year despite the heavy losses.
Sadly BT are not unique in such inequalities. Here are a few facts to entertain and (I hope!) enrage you:
  • In 2007, chief executives of 365 of the largest US companies received well over 500 times the pay of their average employee.
  • In many of the top companies, the chief executive is paid more in each day that the average worker is in a year.
  • Among the US Fortune 500 companies, the pay gap in 2007 (between CEO and average employee) was ten times as big as it was in 1980.
  • It’s estimated that the average CEO in a large UK manufacturing organisation earns 31 times as much as the average production worker. In the USA, it's 44 times as much.
  • Boardroom pay in the FTSE 100 index has risen by 16% (2004), 13% (2005) 28% (2006) and 38% (2007). During this period of time, inflation was rarely more than 2%
  • The average pay (including bonuses) of CEOs in UK top companies stands at just under £3m.

I leave you with a thought to ponder:
After reviewing empirical research, the International Labour Organisation concluded that “there is little or no evidence of a relationship between executive pay and company performance. These excessive salaries are more likely a reflection of the dominant bargaining power of executives”
As ever, dear readers of HR Case Studies, your comments are invited!

1 comment:

  1. So you’ve risen from the factory floor and made it to the dizzying heights of the boardroom. On the way up you promise yourself ‘I’ll be different, I’ll remember my roots’. But then you have the option of a Merc rather than a Ford, a big bonus rather than a small one, an obscene salary rather than a comfortable one. Do you stay in your semi or move to your dream house in the country, send your children to private school rather than the local comp, Primark or Prada?

    So whilst research may show that paying an individual a big bonus or not has no impact of company performance are you going to be the first one to break that cycle? Your heart may say ‘Yes’ but your head (and your partner) will probably be screaming ‘No’!