Buying The Best And Brightest?

THE average earnings of top company executives in Britain are a record 98 times more than those of a typical employee. Since 2000, the earnings of FTSE 100 chief executives had grown 102.2 per cent while the average employee had seen their pay rise 28.6 per cent in that period, new research shows. Admittedly, such disparities mean little to those who believe talent, amid today’s cutthroat competition, should be rewarded above all else.
Caps are worth considering, their argument goes, only if brilliance could be clearly quantified. Britain is not quite in the league of the United States, where the average CEO earned 821 times as much as a minimum wage worker last year. Yet the British have been steadily climbing the compensation ladder; ten years ago, the pay differential was 39:1.
With corporations around the world scrambling to recruit and retain the best and the brightest, how far do pay differentials go towards improving performance? The answer would obviously vary with corporate balance sheets. Few shareholders would begrudge the idea of compensating exceptional executives as long as profit margins remain impressive. Outside the boardroom, the celebrity status of some CEOs is truly astounding. Yet envy among ordinary people tends to dissipate once the volatility of the job becomes more apparent. A series of successful years could suddenly collide with a set of variables outside the control of the chief executive. For every corporate boss destroyed by greed and graft, upright ones simply succumb to circumstances.
Gone are the days when top corporations were associated with lifelong job security. Some employees displaced by harsh business environment can still expect a respectable exit. They soon discover that ‘golden handshakes’ do not glitter. The scandals surrounding Enron, Worldcom and other organisations have tarnished the image of big business and precipitated sporadic reforms. The compensation conundrum becomes starker when companies seem capable of continuing to pay astronomical bonuses while cutting back on employee health benefits and other perks if not perpetrating massive layoffs. The rush to boost corporate performance through lucrative compensation packages alone must not obscure the other precious commodity that continues to sustain organisations: employee morale.