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Reduce CEO pay or raise average workers' pay?

Victoria Dmochowski

The BBC's Business Editor discusses gender pay gaps and upcoming reporting on pay gaps between CEOs and the average worker: http://www.bbc.co.uk/news/business-43793356

Are you preparing to report on CEO pay? Any thoughts on how the playing field might be leveled out a bit? 

"On pay, the most effective anchor on executive compensation may yet be the forced publication from June of this year of CEO pay compared to the average worker.

This ratio may produce some odd results - for example, Goldman Sachs will have a lower ratio than Tesco thanks to the fact that the average Goldman worker is paid a heck of a lot of money.

However, once published, companies will be loathe to be seen to let it go in the wrong direction. That leaves two choices - reduce CEO pay or raise that of average workers. Both - or either - politically acceptable outcomes." - Simon Jack, BBC Business Editor

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  • Soundbite journalism once again.
    The very nature of CEO pay is that at leat 2/3 of it is significantly variable - both up and down. That is the very principle of performance related pay for senior people -
    a large proportion is "at risk". On the other hand, In bad years the pay overall of the average worker will be relatively constant compared to previous years, and will also vary little in good years.
    Consequently in bad years the pay-ratio will drop massively, and in good years it will rise significantly.
    Simon Jack has clearly misunderstood the situation and jumped to unfounded and badly thought out conclusion that only two choices can exist.
    An alternative would be for very senior people to be paid exactly the same amount whatever the business results (just like average staff) - this would maintain a constant pay-ratio but would not sit well with investors and shareholders who will insist on some variability.
    Victoria - you have taken the time to cut and paste this quote - what views can you share with us on this?
  • in reply to Ray

    Here's my non evidence-based personal view - While it makes sense to attract senior talent with pay and benefits, I think that the vast difference in quality of life (or possibly lifestyle) between top earners and average/low paid workers is unfortunate.

    There are costs of living that everyone needs to be able to afford and not everyone can, for various reasons. The role of a CEO is challenging and requires a vast range of skills but that could be said of many other roles. When I consider the struggles of low paid or average earners to make ends meet, I wonder about the ethics of how pay divided across an organisation. (Feel free to tell me how this is done.)

    Hard work and excellent performance should be rewarded at all levels but a part of me sees some social injustice in a wealthy nation where there is so much poverty. Is CEO pay to blame? No, but there are organisations who consider financial wellbeing to be an important part of their health and wellbeing agenda and I'm glad to say CIPD is one of them. We've recently introduced an employee benefit (Neyber) which educates and supports people to better manage finances and can offer salary-deducted low APR loans to help clear debt. So while a part of me thinks that the gap between average pay and CEO pay could do with shrinking, there are lots of other things organisations can do to show that they care about the financial wellbeing of their people.

  • in reply to Victoria Dmochowski
    The journalism standards would seem to equate with those of its grammar. To loathe is a verb about hating intensely whereas loath is an adjective about being unwilling.
  • in reply to Victoria Dmochowski
    In many large organisations, giving workers some of the CEO's salary would only result in a few pounds more per employee.
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