Executive Pay: The Subject Which Must Not Be Named

It’s the week of the annual CIPD conference, where the great and the good of the HR world get together to “learn from best practice examples from leading organisations ... pick up practical tools that you can implement right away in your organisation... and hear the most current thinking from high quality speakers who have been there before.”

And with split second timing, one of the most high profile members of the profession makes a public attack on the excesses of executive pay, saying that “top pay has been found to bear little or no relation to company performance”

He goes on to say that, “Perhaps it would help to make directors and CEOs more accountable to their employees. Perhaps there should be employee representatives on company boards.”

Great to hear a prominent member of the HR profession to be making a public statement on such issues, isn’t it?

The only problem is, that this comment doesn’t come from any member of the HR profession. It comes from John Sentamu, the Archbishop of York.

Let’s look at what the Archbishop says in a bit more detail:

The news that Chief Executives (CEOs) of the FTSE 100 companies last year received average pay increases of almost 50 percent adds urgency to our cause. Typically these CEOs receive 300 times as much as the least well paid British employees in their companies. If they have a responsibility to their staff, it is hard to imagine a more powerful way of telling some people that they are of little value than to pay them one-third of one percent of your own salary. Top pay has been found to bear little or no relation to company performance, but even if it did, isn’t the performance of a company dependent on the work and wellbeing of all its staff?

Do you have to be a senior cleric in the Church of England to realise that paying some employees one-third of one percent of the salary of the CEO of an organisation is blatantly unfair and unjust? I think not.

But is this an issue that the HR profession seems to be happy to tackle?

Judging from the timetable for this year’s CIPD Conference it would appear that the subject of executive remuneration is the HR equivalent of Lord Voldemort: The Subject Which Must Not Be Named.

If you’re interested in Talent Management, Delivering Organisational Effectiveness or Building a Culture of Engagement and Leadership, the conference will have you feeling like a kid in a sweet shop. But if you’re looking for some open and frank discussion about the issue that has got the rest of the population gossiping, you are searching in vain.

OK, as an HR professional with a degree in Theology, I’ve probably got more in common with what Archbishop Sentamu is saying than many of my colleagues. But the question I’d like to ask is this:

If as HR professionals we’re not addressing this issue, who else is?

Come on, HR people! How about responding to this challenge of the Archbishop of York:

Our society will work best when we recognise that as human beings we are all, fundamentally of equal worth and members of one society.

Let us do it. Let us do it now.

Your comments are, as ever, most welcome

HR: The Invisible Men

Upon being told that President Calvin Coolidge had just died, Dorothy Parker (American poet, wit and satirist) responded, “How can they tell?”

Sadly, I fear that the same words could be applied to the HR Profession unless something changes pretty soon.

Over recent months, the pages of the national press have been filled with the debate and moral outrage over the excesses of the bonuses paid within the UK banking system. Yet the contribution from the HR community has been practically non-existent.

Comment on the situation from either individual HR Directors within the banking sector (and here’s a challenge: name one!) or the CIPD has been less than negligible. The profession seems to be increasingly populated by Invisible (and Inaudible) Men.

Call me old-fashioned, but I thought that reward and recognition was part of HR’s remit?

Or perhaps the HR function is simply aiming to outsource any activity beginning with the letter R. Recruitment: pass it to a third party; Redundancy: we’ll get an outplacement consultancy to manage that; Reward and Recognition: that’s something for the Remuneration Committee.

At this rate, HR will resemble the Cheshire cat in Alice in Wonderland:

This time it vanished quite slowly, beginning with the end of the tail, and ending with the grin, which remained some time after the rest of it had gone.

“Well! I’ve often seen a cat without a grin,” thought Alice; “but a grin without a cat! It’s the most curious thing I ever saw in my life!” 

Dear HR colleagues: there one thing beginning with R that can’t be outsourced: Responsibility. It’s time to take it and make the profession’s views heard. Failure to do so is to risk allegations of irrelevance.

And we don’t want that, do we?

Missing, Presumed Dead.

Scotland Yard have today announced that they have called off the investigation into the apparent disappearance of eight UK Business Executives, many supposedly drawn from the HR community, who have been reported as missing over recent months. A spokesman for Scotland Yard said that an evaluation of the evidence had led to the conclusion that none of these individuals had actually ever existed in the first place, and that they appeared to be some form of Urban Myth. Scotland Yard have, however, released details of the “missing” persons, and stated that in the unlikely event that any of the following individuals are sighted by members of the public, they should contact their local police station.

The Eight Mythological Executives are:

A banker who has left the UK to work overseas as a result of the pressure on the financial community to control remuneration.

An HR Director who argued that Executive bonuses unfairly rewarded those at the top of organisations while penalising those lower down.

An HR professional who believed that their company’s performance management system was actually a little bit too simple.

A Learning and Development Manager who could state with absolute certainty how much money his company had spent on training last year.

An HR professional who can point to an incontrovertible link between training activities and an increase in company profit.

An HR Director possessing empirical evidence that there is a direct link between large bonus payments for senior managers and financial performance.

An HR Director who yearns for the day when his function will be rebranded as “Human Capital.”

An HR Director who believes that she has better control over her function now that all transactional activities have been outsourced.

Readers of HR Case Studies have been asked to assist Scotland Yard with their enquiries. If any of you believe that you have ever seen any of the above individuals, please leave a comment below.

A fair day's wages for a fair day's work?

The issue of the excesses of executive pay has featured many times in the pages of this humble little blog. But an article in today’s Guardian once again turns the spotlight on this crazy situation.

I defy you to read some of these facts and not feel some sense of injustice!

• The average income of a FTSE 100 chief executive is over £3m per year, including bonuses and pension contributions. This is more than 100 times median household income.
• It is not uncommon for CEOs to earn 200 or 300 times as much as the average pay of their employees.
• In Terry Leahy's final years CEO at Tesco, he was paid 500 times the average take-home pay of his colleagues.
• In the year to September 2009, the FTSE LOST a third of its value. During the same period of time, executive pay ROSE 10%  
• In 1980, the average pay of a UK CEO was ten times that of average UK earnings. By 2006, the average pay of a UK CEO was 75 (say it out loud and think about it ... seventy-five!) times that of average UK earnings

So what can be done about such evident and surely unsupportable imbalances between those at the top of UK organisations, and those who work within them? Today's Guardian article offers at least one good suggestion:

One thing that government could do to shake things up would be to change the composition of remuneration committees, adding some broader and more critical voices to the mix and disrupting the complacent back-slapping. Ed Miliband's proposal for worker representation on remuneration committees would be a promising way forward. It would inject a dose of realism into the determination of corporate pay, as the presence of even a single dissenting voice could puncture group-think, and lead to pay policies that were broadly justifiable to all sections of an organisation, rather than only serving the interests of a self-perpetuating elite 

Further reading from HR Case Studies

 

Dutch knock out Scotland, and take the lead on executive pay

 

£36.8m. Not bad for a year's work.

 

Trade Unions add their voice to the chorus demanding an end to the bonus culture

Your thoughts and comments are, as ever, most welcome.

Earning £50,000 per annum is essential for happiness. Really?

As anyone familiar with Monty Python's Four Yorkshiremen will know, "Money doesn't buy you happiness"

But it seems that communal living in a shoebox in the middle of the road while drinking cold tea from a rolled up newspaper is no longer the accepted path to contentment.

According to research undertaken by Princeton University, personal happiness rises steadily until you're earning a mere £48,960.98. (OK, the study says $75,000, but I prefer the pseudo-precision of the English Pound!)

Guardian: The price of happiness? £50,000 per annum

The survey asked people to rate how happy they felt each day, based on their experiences of emotions such as joy, worry, sadness and fascination. They were then asked to rate their overall satisfaction with life, on a scale where zero was the worst they could imagine life to be and 10 being the best.

The researchers found that life satisfaction rose steadily the more people were paid. Happiness rose with income too, but plateaued when people reached an annual salary of $75,000. For those on more, happiness appeared to depend on other factors. Unfortunately the "other factors" aren't particularly well defined, but are broadly characterised as "spending time with people you like, avoiding pain and disease, and enjoying leisure."

There's actually an argument that, far from merely plateauing (a good word if you've a handful of vowels at Scrabble!) at a certain level, too much filthy lucre has a negative effect. How about these quotations from the über-rich and famous:

• The care of $200 million is enough to kill anyone. There is no pleasure in it. (W. H. Vanderbilt)
• I am the most miserable man on earth. (John Jacob Astor)
• I have made many millions, but they have brought me no happiness. (John D. Rockefeller)
• Millionaires seldom smile. (Andrew Carnegie)
• I was happier when doing a mechanic's job. (Henry Ford)

Perhaps that explains why us Brits are such a miserable bunch. According to the Office of National Statistics, half of people in full time jobs in 2009 earned less than £25,816. Some 90% earned less than £46,278 a year. Just think: increase the average British salary by a mere £2682.98 per year (that a tiddly little £51.56 per week!) and 90% of us will be delirious.

I wonder what the 200,000 people in Niger made homeless by the extreme flooding which has only worsened the country’s crippling food crisis would make of all this though? The average total annual family income in Niger is just over £100.

Puts things into perspective, doesn't it?

Mind the Gap (for the next 57 years)

Oh, the heady days of 1970!

• Jimi Hendrix, The Who and Emerson Lake and Palmer at the Isle of White Festival
• Simon and Garfunkel release Bridge over Troubled Water
• Concord makes its first supersonic flight
• Paul McCartney announces that the Beatles have disbanded
• Onboard Apollo 13, Jim Swigert announces "Okay, Houston, we've had a problem here"

How things have moved on.

Or have they? One of the other (apparently) life changing events of 1970 was the passing of the UK Equal Pay Act, which was intended to bring the pay of men and women into line. But it seems that working women who thought they might live to see Britain's pay gap finally close will have to hold out for another 57 years.

According to research published this week by the Chartered Management Institute, at the current rate of progress it will take until 2067 before the gap between men and women managers is eliminated.

Guardian: Equal pay for women not likely till 2067, says research

Women, it seems, have also been harder hit by the recession, with more female workers than men being made redundant in the past 12 months.

On a slightly more positive note, women's salaries increased by 2.8% over the past 12 months, compared with 2.3% for men. But with the average UK salary for a male manager currently £10,031 more than that of a female manager, women face a 57-year wait before their take-home pay is equal to that of their male colleagues. At senior level male pay still outstrips female pay by as much as a staggering 24% . Even at junior level the gap is significant, with male junior executives receiving £1,065 more than their female counterparts.

The CMI is calling for the government to "take greater steps to enforce pay equality by monitoring organisations more closely and naming and shaming those who fail to pay male and female staff fairly" But with only four women in the Cameron/Clegg coalition Cabinet, it's likely that the call will fall on deaf ears.

Incidentally, with women making up only 14% of the total in the coalition Cabinet, this means that Britain lags behind other European countries for the number of women in top political jobs. Spain has 53% women in its Cabinet, while Germany has 37% and France 33%.

So it looks as if the Chartered Management Institute's "Ambitious Women's Toolkit" might be needed in order to fix some of the issues that didn't disapppear when flares went out of fashion!

Brits: Your employer owes you over £5,000 for unpaid overtime

According to figures published by the TUC, if you're an average Brit putting in unpaid overtime you would only start being paid from today if you'd done all your unpaid work at the start of the year!

However, if you're one of those who clock up over 10 hours a week, you'll have to wait until April 26th before the money hits your bank account.

Last year more than five million workers did an average of seven hours 12 minutes of unpaid overtime every week, worth £27.4 billion, or £5,402 each, according to the TUC.

Press Association: Rise in workers' unpaid overtime

So how do we compare with our colleages across Europe? An exact comparison is difficult to make, as there are different rules and thresholds in place, but many countries have imposed maximum overtime limits and these are highlighted below. (Information derived from European Industrial Relations Observatory Online)

Austria
Maximum 5 hours per week

Belgium
No maximum

Denmark
Maximum 12 hours over 4 weeks

Finland
138 hours over a 4-month period

France
180 hours per year or set by collective agreement

Germany
Varies between sectoral agreements.

Greece
3 hours per day spread over 43 hours

Hungary
200 hours per year

Italy
250 hours per year (or lower by agreement)

Netherlands
None, but there are overall statutory daily, weekly and quarterly working time limits

Norway
200 hours per year

Poland
4 hours per day, 150 hours per year

Spain
80 hours per year

Sweden
None, but there are overall statutory weekly working time limits

UK
None, but there are overall statutory weekly working time limits (from which individuals may 'opt out')

As TUC General Secretary Brendan Barber has stated: "Staff are understandably doing all they can to help their company recover from the recession - and bosses should thank them for going that extra mile, but working time still needs to be properly managed. A long hours culture is bad for workers' health and family life - whether the hours are paid or not."

OK. Confession time for HR Case Studies readers: how much unpaid overtime are you putting in?

Shell shareholders are revolting!

Readers of HR Case Studies will already be aware that there have been a number of pay protests at company annual meetings in recent months, raising concerns over the level of executive remuneration including excessive bonuses.

Shareholders have made their feelings known at the annual general meetings of Royal Bank of Scotland, BP and Shell.

It will be interesting to see how Royal Bank of Scotland and BP respond to the example set by Royal Dutch Shell now that they have announced their decision to freeze the pay of  top management following a shareholder revolt last year. In May 2009, 60% of Shell's shareholders voted against its remuneration report at its annual meeting.

Consequently, today, Shell has the salaries for its chief executive and chief financial officer are being frozen until 2011. The company said it wanted to "demonstrate appropriate restraint in the current economic environment".

Shell will also award bonuses based on how well projects are delivered, rather than its previous measure of total shareholder return.

BBC: Shell freezes pay for top managers after revolt

Over to you RBS! Let's see if you follow suit!

Goldman Sachs, Wayne Rooney and The Talent Myth

My heart bleeds for the soon-to-be impoverished partners at Goldman Sachs.

Although many executives working in Britain ranked below partner-level earn much more than £1m each, the 100 UK-based partners are capping their 2009 pay and bonuses at £1m each. Hard times indeed.

But if Wayne Rooney and a select number of other Premier League players can earn in the region of £5 million (yes, spell it out, five million pounds) per year, perhaps the Goldman Sachs partners may feel undervalued.

Ask another question, however, and a different view emerges. Don't ask if either a Goldman Sachs partner or a Premier League football player deserve the money they are paid. Ask if you could do what they do - and with the same results.

I doubt that there are many of us who could put on Rooney's boots and, as he did this weekend, score four goals against Premier League opposition (OK it was only Hull City!), but what would be the result if we slipped into the pinstriped suit of a Goldman Sachs banker? Would any of us be unable to make even one or two correct investment decisons?

The usual argument that is wearily paraded by the banks is that they have to pay such astonishing salaries to attract and retain the talent.

There is a different view:

The talent myth assumes that people make organisations smart. More often than not, it's the other way around.

Think about it!


Goldman Sachs UK partners cap their pay at £1m each

New Yorker: The Talent Myth

£9.6m is “going rate” for the job according to RBS chief executive

In defending his bank's pay structure to a committee of MPs the chief executive of Royal Bank of Scotland (RBS) has admitted that even his parents think he earns too much.

He said that he was offered the "going rate" of £9.6m for his job but claimed that his own pay package was worth next to nothing as the share price of RBS is currently so low.

Shares in the bank have fallen for the past three years, declining 41% last year and 87% in 2008.

He holds shares worth up to £3.4m but will only be allowed to sell them in 2014, should the bank's share price rise above 70p.

BBC: RBS boss says even parents think he earns too much

• “My parents think I earn too much.” How effective a measure of the appropriateness of remuneration levels do you think this could be?

Need a pay rise? Beat the bankers to Bucharest!

It seems a while since we had an “ a new report claims” article, so let’s remedy that before the weekend.

Apparently, in real terms, UK managers' salaries are amongst the lowest in the world, according to a report quoted in this week’s Management Today.

Even without this week’s announcement of an increase in National Insurance contributions, in a new study of global management salaries undertaken by the Hay Management Consultancy Group the UK has just been ranked 43rd of 56 countries once the higher cost of living has been factored in.

According to the Hay report, Britain ranks behind China, Mexico, Hungary, Slovakia and even Kenya in the disposable income stakes. At the top end of the scale, the oil-rich Gulf states dominate: managers in Qatar are the world’s best paid, followed by those in Kuwait, United Arab Emirates, Saudi Arabia and Oman.

If you’re planning an escape to somewhere in Europe that gives you more bang for your buck (or Pow! for your pound!) the place to head for is Romania (ranked 8th), followed by Turkey (9th). Ireland (16th), Greece (17th) and Portugal (20th)

Hay point out that most of the big developed economies are to be found in the lower half of the disposable income league; not just because of higher living costs, but also because they enjoy a greater supply of qualified managers. Hay explain the low ranking of Britain as “an indication of strength in depth: if you’re a rare commodity, you get paid a lot more.”

For those planning to beat the rush of the bankers who are threatening to leave the country as a result of their bonuses being capped, Aer Lingus offer one way flights from Gatwick to Bucharest starting at £49.99. But unless you’re attracted by a chaotic jumble of traffic-choked streets, ugly concrete apartment blocks and grandiose but unfinished Communist developments, you might want to splash out on a return ticket.

Management Today: Want a pay rise? Move to Romania or Kenya

• How do the findings of this report support or clash with those of the UBS Prices and Earnings Survey quoted in the earlier HR Case Studies article,  "How long do you have to work to afford an iPod nano?"

Half a million fewer workers earning overtime pay

According to a TUC analysis of official figures released yesterday, the number of people working paid overtime in the UK has fallen by nearly half a million in the last year to just under four million.

Here’s an overview of the TUC analysis:

In Summer 2009, 15.8 per cent of employees in the UK earned paid overtime, a fall of 1.5 percentage points since Summer 2008
Employees were working an average of six and a half hours paid overtime per week this year, a fall of 12 minutes on 2008
The average amount of weekly overtime works out at £2,888 a year per employee
The major reason that overtime has declined is simply because many jobs with overtime have disappeared due to redundancy during the recession
55 per cent of the decline in paid overtime is due to job losses, with the other 45 per cent due to employees having fewer opportunities for overtime
Those most affected are workers aged 20-24
15.9 per cent of young people earned overtime pay in 2009, compared to 20.1 per cent in 2008 - a fall of 474,000
The sectors most affected by the drop in overtime are manufacturing, transport and communication (broadcasting, TV and radio production, postal workers)

Paid overtime has actually fallen steadily since records began in 1998, when nearly one in four (24.8 per cent) workers earned paid overtime.

TUC General Secretary Brendan Barber said:

These workers are the hidden victims of the recession. Job security remains the number one concern for workers across the country but the sharp drop in paid overtime shows that many people in work are also suffering financially. Even those that are still earning overtime are often no longer able to claim double pay.

Lots of people rely on overtime pay to earn a decent living. As Christmas approaches, a lack of extra income will put family budgets under even greater strain.

While many in the City look to their stocks and bonuses as a barometer of the health of the economy, having enough hours of work and overtime pay matter far more to millions of workers and their families

Half a million fewer workers earning overtime pay

• Is overtime the most effective way of dealing with sudden and temporary surges in workload?

Transparency or Voyeurism? How much do I need to know?

It probably started with the Daily Telegraph’s exposure of the abuse of the UK parliamentary expense system, but we do seem to be in danger of indulging in an orgy of public striptease, slowly revealing the most intimate details of our wages and salaries.

Let’s look at a few examples:

MPs expenses

The Daily Telegraph's investigation into Cabinet Ministers' expenses led to the creation of an expenses dossier which contains electronic scans of every expense claim made by MPs since 2005.

The information is so detailed that it is public knowledge that, for example, Jacqui Smith bought a number of items from B&Q at 3.29 pm on 7 April 2008, including six bags of sand at £1.39 per bag.

Similarly, Gordon Brown paid (and claimed) for having his grass cut on 15th May 2008, costing him £35.

Office of National Statistics Salary Survey

Last week saw the publication of the Office of National Statistics annual survey of salaries.

This informs us that the highest-paid category of employee in the UK is Directors and CEOs of major organisations who earn on average £172716 per annum; the most poorly paid employees are in the category of school mid-day assistants who earn on average £3143 per annum.

Trade Union Pay

In August of this year, under the headline of “Trade union leaders receive huge pay rises despite redundancies and salary cuts among members” the Daily Telegraph (yes, it’s them again) published the salaries of many of the UK’s TU leaders, revealing that, for example, Tony Woodley, the joint general secretary of Unite, which with two million members is Britain's biggest trade union was said to have seen an increase in his pay and benefits package last year of 20 per cent, from £88,359 to £105,761.

Chief Executive Pay

Not to be outdone by the Daily Telegraph, in September the Guardian published its list of the salaries of the top FTSE 100 Chief Executives, revealing in the process that the most highly paid chief executive was Bart Becht of Reckitt Benckiser who received £36.8m in pay, bonuses, perks and share incentive schemes.

BBC Salaries

This week the BBC has published information on its senior management structure for those divisions of the BBC which report directly to the Director-General. The information also contains details of senior staff salaries and expenses. All that is required is a couple of clicks and it is there for anyone to see that, to choose a name at random, Tim Davie (Director of BBC Audio & Music and a member of the BBC's Executive Board) last year earned a salary of £325,000, with a total remuneration of £403,000. Oh, and by the way, he ran a team Away Day on 24th February which cost £750.

CIPD

Not wanting to be left out of the game of “I’ll show you mine if you’ll show me yours”, even the CIPD felt obliged to hang its washing out to dry in September, and thereby caused quite a stir in the HR community when it announced that CIPD Chief Executive Jackie Orme received a bonus to top up her £300,000 per year salary at a time when other CIPD staff had had a pay freeze imposed on them.

• There's clearly too much information to digest above, so you're all let off with one simple question today: Is it healthy for so much information to be in the public domain?

Bonus row hits Ministry of Defence

Today has seen mounting criticism of the £47m in bonuses that has been paid out to Ministry of Defence civil servants.

Although the payment of such bonuses had been agreed in earlier pay deals, and average out at less than £1,000 for each of the MoD’s 50,000 staff, families of serving soldiers have criticised the payment of such performance-related bonuses as "obscene” and “insensitive”.

An army private on the lowest salary earns £16,681 a year, with a six-month tax-free operational allowance of £2,380 if posted to Afghanistan.

The MoD employs 85,000 civil servants - one for every two active armed forces personnel.

£287,809,049 has been paid out in bonuses since 2003

Although the MoD has stated that such pay awards are met from within salary budget and have no impact on the operational or equipment budget, the UK Conservative opposition has claimed that, "Many in the armed forces will be aghast that bonuses are being paid on the basis of 'outstanding performance'"

BBC News: MoD bonuses attacked by families

• Are there some organisations within which the payment of performance-related bonuses is inappropriate?

Would you take a pay cut for a better boss?

The Chartered Management Institute (CMI) has just published the results of a survey (all together now…..groan) of 3,000 UK adults which reveals that one in every two workers would be prepared to take a pay cut if that meant they could work with a better manager.

The report also claims that UK firms invest less in their managers than their competitors, and that this needs to be addressed by both the Government and employers if the skills gap is to be reduced.

Worryingly, a large proportion of UK bosses describe themselves as "accidental managers", with no training and no ambition to manage people at all.

The CMI is launching its Manifesto for a Better Managed Britain and demanding that urgent action is taken to transform management and leadership performance. The report poses the following challenge:

"In what other profession would it be acceptable for only a quarter of practitioners to hold a professional qualification? The sad truth is that UK managers are no longer regarded as professional, competent or accountable."

Daily Telegraph: Half of workers have resigned because of bad management

CMI: Better Managed Britain campaign launched to bring about skills transformation

• Would you be prepared to work for less for a better boss?
• If you're from outside the UK, what's your experience of leadership development in your country?
• Is management something that can be taught?
• Does it matter if managers don't actually hold a professional qualification?

Now, remind me what Maslow and Herzberg said about money as a motivator….

Personnel Today magazine (who deserve an easier day from you after Wednesday’s “Sexy HR Manager” debate) have reported that there’s a marked decline in blue-chip companies seeing cash as the only reward mechanism for executive staff.

Using the results of a survey (mini-groan!) from Mercer Executive Reward, it’s reported that although most UK blue-chip Companies will offer pay rises in 2010, there would be "less emphasis on the cash element when rewarding staff and more on career development and elements of work/life balance".

According to Mercer, “cash, tarnished by the role of bonuses in the economic slump, is no longer king in the eyes of employers. It is being usurped by an emphasis on employee engagement and a focus on motivating specific, high-value employees.

Personnel Today: Blue-chip companies seek non-cash rewards

• Where does the phrase “Blue-Chip” originate?
• Where does money fit into Maslow and Herzberg’s theories of motivation?
• Do you think that the trend reported above is likely to continue as the recession (hopefully) ends?
• Do you believe that career development and an improved work/life balance appeal equally to high and low paid staff?
• Loaded question: Is offering career development instead of cash as a reward a sign of an enlightened organisation or a con-trick to keep wage costs down?

Cocaine in the City: not so much a reward system - more a way to keep going

According to a report in yesterday’s Financial Times, the use of cocaine remains a serious problem among City workers in spite of rising unemployment and lower wages following the credit crunch.

A spokesman for The Priory psychiatric hospital in north London, told the FT that the number of bankers coming for treatment had risen significantly over the past three years, even when taking account of a large dip after the onset of the financial crisis in 2008.

The Priory spokesman earlier told MPs on the parliamentary home affairs committee that people working in financial services were more likely to run into problems with powdered cocaine abuse than other elements of society. "They often have a high-pressure job and will often start using it not so much as a reward system but as a way to keep themselves going," he said.

Recent Home Office figures show that Britons are the biggest consumers of cocaine in Europe, with at least one million people estimated to have taken the drug in the past year. About 12,000 people are being treated for their use of powdered cocaine.

Cocaine use in the City still 'a real problem'

• Are you surprised by the figures quoted in the report above?
• What do you believe that organisations should do to minimise the incidence of drug use in or around the workplace?
• Bankers "often have a high-pressure job and will often start using it not so much as a reward system but as a way to keep themselves going." What do you think of this statement?

BMW Links Executive Pay to That of its Line Workers

While the salaries of UK FTSE-100 chief executives are rising twice as fast as salaries for shopfloor workers, in Germany, BMW has become the first major company to link the bonuses of its top managers to those of its assembly line workers.

The company stated that creating a fairer work environment was its reason for adopting this approach. Given BMW's size and weight in the global business market, other firms seem set to take notice.

Starting in 2010, the company will use a common formula to ascertain and award bonuses to its upper and lower level employees, based on the company's performance as measured by profit, sales and other factors. That means that upper level management could potentially lose more money than their lower level counterparts for bad performance.

A spokesman for BMW said the company's goal was to create fair and transparent compensation practices and to prevent a gap between management and the workers, as the underclass, from developing. "We don't just want to build sustainable cars. We also want to have sustainable personnel politics. We think this is good for the company culture," said the spokesman during an interview with Spiegel Online.

BMW Links Executive Pay to That of its Line Workers

• What are your view on such an approach?
• How do you think that this approach will be viewed by (a) senior managers and (b) lower level employees?
• Do you think that this approach is likely to spread beyond Germany?
  

Targets made easier to hit for UK Chief Executives

Why does this not surprise me?

Despite the country being in the depths of recession, the chief executives of Britain's top companies earned the same amount in the past year as they did during the booming economic times in 2006.

According to pay specialists Income Data Services, the total cash remuneration for the bosses of companies in the FTSE 100 fell by an average of just 1.5% in 2009 compared with 2008, with a 29% drop in bonuses partially offset by a 7.4% rise in salary.

Or, in plain English, what the Chief Executives lost on the bonus swings, they more than made up for on the salary roundabout.

Though the reduction in bonuses may be the largest fall in the past decade, it still means that the typical chief executive took home an extra £500,000 on top of their basic salary. The IDS research also shows that the average bonus payment fell from £707,000 to £502,000 over the past 12 months. Hard times indeed for the Chief Executives!

A spokesman for IDS said that "what is surprising is that the credit crunch has had so little impact on the rate at which chief executives' salaries are rising. Salaries for FTSE-100 chief executives are rising twice as fast as salaries for shopfloor workers."

It also seems that the chinning bar is being lowered to increase the likelihood of success for the Chief Executives. The IDS spokesman said: "This recession is posing difficult questions about how directors should be remunerated. When incentive plans fail to trigger, remuneration committees often respond by redesigning schemes so that targets are easier to hit.”

Shareholders are understandably becoming worried that the rules of the game are constantly changed and this has provoked a number of pay protests at company annual meetings this year, including at Royal Bank of Scotland, Shell and BP.

The HR Case Studies editorial team will be returning to this issue over the course of the week, but feel free to add your comments below!

Company bosses' earnings remain at boomtime levels

• Can there be justification for Chief Executive Salaries to be rising at twice the amount of shopfloor workers?
• What are your views about the suggestion that the targets for Chief Executives are being made easier to hit?

The Brits: Miserable again.

It’s cold, raining, and windy.

The clocks going back mean that it’s dark just after lunch.

Hardly any wonder that we’re a miserable bunch.

But it’s official. For the average employee in the UK, job satisfaction has plunged from a score of 46 to 37. To make the situation even grimmer, 28% of us believe that our personal living standards have worsened, compared to a miserly 14% (presumably bankers!) who consider them to have improved.

Fed up yet? It gets worse! Six month ago only 38% of us reported excessive pressure at work, but this has now risen to 42%. We’re also more likely than a few months ago to say that we have seen increases in stress and conflict at work, as well as bullying by line managers (of whom women are by far the worst, as readers of HR Case Studies already know.)

The CIPD, who commissioned the survey, interpret its results by saying that “in the spring we interpreted high job satisfaction in the face of the recession as a 'fixed grin', where employees felt lucky just to have a job. In this quarter, the fixed grin is slipping”

To top it off, more of us would ideally like to change jobs (if we could actually find one to go to)

What does this mean for employers? “Employers could face a talent drain as the labour market recovers – just when they need all hands to the pump to capitalise on recovery,” says the CIPD. “Employers must also focus on developing the people management skills of their front line managers if they want to manage stress and encourage and enable employees.”

Hemlock anyone?

UK job satisfaction has plunged, says CIPD report

• What can companies practically do to motivate employees during such challenging times?
• The survey concludes that “productivity and competitiveness could be undermined in firms most affected.” What is this likely to mean in practice?
• Deep and philosophical question: Spike Milligan once said, "Money can't buy you happiness but it does bring you a more pleasant form of misery." Was he right?