Cable reforms won’t change bonus culture

Organisational Development - Comments Off - Published on January 24 2012

Like many others I have yet to hear any reasonable justification for the extortionate salaries being paid to corporate executives and cannot comprehend the level of pay increases being awarded to some company bosses. The rewards paid, in most cases, appear to bear little relationship to performance or to risk. And even the top earners admit that they are not incentivised by money. Jeroen van der Veer, formerly chief executive of Shell said “if I had been paid 50% more, I would not have done it better. If I had been paid 50% less, then I would not have done it worse”.

But, the UK government’s plans to curb executive pay, announced by Vince Cable today, fail to address the problem and could even make matters worse. Like the measures recently introduced to increase the number of women on Boards, these proposals will change little, they represent unnecessary interference and yet more pointless bureaucracy. The government’s plans include requirements for more pay transparency, diversity on boards, remuneration reports and shareholder voting on pay deals. These policies tinker at the edges of a much deeper issue concerning the nature of organisations and corporate culture. I am sure that most businesses will find ways to get round the new requirements without making any fundamental changes to remuneration systems, management style, values or culture – and that is where change needs to take place. Sadly, organisations that do not truly value integrity, transparency and fairness will not suddenly change their ways as a result of new legislation.

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