Archive for June, 2010

The root of all evil?

30th June 2010

While the discussion following the coalition’s recent budget has understandably focused on the brutal cuts facing ‘austerity Britain’, another measure seems to have sneaked through without the attention that the HR community might be be giving it. Hiding in the shadow of public sector job losses and lurking under the skirts of the two year pay freeze is the announcement that Will Hutton will lead a review of public sector pay. Having pledged that senior public servants will have their pay pegged to no more than 20 times that of the lowest paid person in their organisation, the Government seems intent on a wider re-balancing of the pay of civil servants.

money_one_pound_coins_sterlingUsing the national minimum wage as a benchmark, the 20 times multiple still leaves the Chief Executive of a NHS Trust able to earn a rather handsome £222,000 odd, so the limitation itself is perhaps not as significant as the intention which might lay behind it: the idea that there should be a relationship between pay in the boardroom and pay on the hospital ward or call centre. This is novel. Market forces is the usual driver for salary decisions in the UK and  there is no obvious reason for a relationship between the reward of leaders and those they lead beyond the rather tricky concept of fairness.

As The Guardian reports, public sector workers are due an adjustment since their rates of reward are so much higher than their counterparts in the commercial world but the urge to control the incomes of the highest paid seems to have gone beyond a discussion about banker’s bonuses and into a potential paradigm shift. Wednesday’s surprise announcement of unexpectedly tough restrictions on Financial Services bonuses across the EU now looks like part of a concerted effort on wage control for senior people. The BBC has announced that it intends senior leaders to earn 10% less than their private sector equivalents (we look forward to seeing that policy designed and applied) and look set to find a way to publish the salaries of their top presenters. Even the mighty Tesco are facing some shareholder activism over the £10m paid to Sir Terry Leahy last year and the £7m paid to Terry Mason who heads up the loss making ‘Fresh & Easy’ business in the US. Meanwhile our woeful footballers seem to be criticized almost as much for their grossly inflated incomes as their mystifying inability to control a football or talk to one another without insults.

What does all this mean? Well, maybe nothing.  Maybe, ‘though, it is an indication that the ability of leaders to lead will be effected by their willingness to recognise an equitable reward for their work based on something other than their ability to occasionally make their shareholders  rich. We’ve written before about the social identity model in leadership (see On leadership, ethics and trust) and this could be the emergence of the boss’s income as a factor in whether or not they will have the moral authority to lead in troubled times. Now, let’s just see where that features in the MBA Oath.……..