Wage restraint begins the boardroom
Posted 1 July 2008 at 8:06AM by Ian Betteridge in Investment and finance
No matter what size the company, wages form one of the biggest costs to business. When times are tough, keeping the total wage bill to a reasonable level is one of the key tools to ensuring the business survives.
Of course, that doesn't mean no one gets a pay rise. If you want to hang on to your best employees, you need to ensure they aren't going to be tempted away by someone who might be prepared to pay them a bit more. But you need to make sure that, over the company as a whole, the percentage increase in the wage bill is something reasonable.
That's why it's so disappointing to see that pay levels for directors in the boardrooms of smaller companies in the UK have risen by an average of between 13-16%. According to The Daily Telegraph, the annual survey of executive pay by Incomes Data Services shows that total cash paid to directors of Aim-listed companies jumped 13.5% in the 10 months to January, while directors of companies in the FTSE SmallCap index got themselves 16% more cash over the same period.
Some of those pay rises will be justified. If, for example, your excellent finance director is being tempted to jump ship a significant increase may well be in order. But an average of 16% across the boadroom sends almost exactly the wrong message to employees who have to make do with single-digit rises that barely keep up with inflation.
Tags: bt, bt broadbandoffice, wages
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Comments
2. At July 1, 2008 11:58 AM, sue from west yorkshire wrote:
I can fully back this one up! A small company (approx 12 employees) with 2 directors where I worked a few years ago fully believed in making sure they had all the benefits of their status but when it came down to looking after the employees whose toil kept them in the manor to which they had become accustomed sought a minor increase in their pay to keep heads above water the answer was 'We're on a tight budget at the moment/we're hoping to look at pay rises after the year-end or whenever!' I worked for the same wage for 3 years before eventually getting a rise which was obviously swallowed up by inflation so I was really no better off!
They were even greedy enough to pocket perks (usually high street vouchers) given by suppliers based on their orders over a set period - it would have cost them nothing to have a share out amongst the workers and show that they had a human side after all (instead of another Gucci handbag)!!!
3. At July 1, 2008 1:04 PM, boon wrote:
Oh the shock and the horror. Some of these CEO's may argue that without them we wouldnt have jobs but the reverse is also true. I wish these FAT CATS would remember who provides their cream!!!!!!!
4. At July 1, 2008 1:07 PM, kim wrote:
quite right so why dont bt practice this.
£60k to patricia hewitt for a part time job (if that) as non executive director?
5. At July 2, 2008 7:16 AM, Michael Bird wrote:
The people at the top are there for a reason.
If you want it get off your but and do something about it is the message the single digit boys should be getting.
6. At July 2, 2008 12:32 PM, Chris Sabin wrote:
"quite right so why dont bt practice this.
£60k to patricia hewitt for a part time job (if that) as non executive director?"But have you looked at the amount the chairman makes? Pales in comparison. BT are a highly successful company who are forever expanding in new area's which is down to ex-chairman and current boardroom who transformed BT from being debt ridden and stuck in the "dark ages" to one of the most succesful companies in the world.
7. At July 2, 2008 1:21 PM, 'Razor' Ramone wrote:
"The people at the top are there for a reason.
If you want it get off your but [sic] and do something about it is the message the single digit boys should be getting."So your argument is that companies should all have just Company Directors and no actual employees, so everyone can make the big money? Do you actually understand how business works?
There will always be people on the bottom rung, and these people are always the one doing the work that pays the wages of those higher up. Simply expecting your wage to rise with inflation is less than selfish; it should be a legal requirement.The comment from Sue hits the nail on the head. That sort of thing is typical of the Director attitude in my experience. A gift provided as a 'thankyou' from another company, perhaps a supplier or client, which could be distributed evenly, is taken as the Director's property even though they have (at best) put in only as much work as any other member of staff.
I understand the desire for more money, but doing so at the expense even of basic decency to your staff is unacceptable.At the end of the day though, it's your own decision to say "No thankyou" to employers who act in this manner and find another job, so almost coming full-circle, I do agree to an extent with Michael's statement.
8. At July 2, 2008 3:29 PM, Beezil wrote:
..."even though they [Director's] have (at best) put in only as much work as any other member of staff"
As a small business owner, and one of the two directors of the company, I really, really disagree with this. Any business owner will have a risk involved in any investment they put into it (i.e. they may not get it back), and they may have also had to put up personal guarantees, therefore openinig up the possibilty of losing their home(s) if their business fails. For that risk, they are therefore entitled to a reward. A "normal" member of staff, i.e. the employee, does not put forward anthing like that, so their entitlement will be totally different.
Don't get me wrong, I fully appreciate the work put in by my staff, but most people do not realise the amount of work I put in as the business owner - staff get to forget about work when they go home, I don't!
As a former employee myself, and doing a lot of work and not feeling that I was getting rewarded, was my reasoning for starting my own business.
Moral of the story? If your not happy, go work for yourself if you can hack the extra stress and insecurity.
9. At July 2, 2008 3:36 PM, Chris Sabin wrote:
Forgot to say, a company secretary in a public limited company must be qualified to be in that poistion. This means he has spent a long time being educated to meet these requirements.
And to Beezil, i could go setup a Private Limited Company with £1 of my money invested. In that case you wouldnt loose very much. It depends on how much you have invested for your arguement to be valid about investeing.
However since your investing with someone else your not a Sole Trader (who could loose EVERYTHING they own).
10. At July 2, 2008 3:55 PM, 'Razor' Ramone wrote:
"Any business owner will have a risk involved in any investment they put into it (i.e. they may not get it back), and they may have also had to put up personal guarantees, therefore openinig up the possibilty of losing their home(s) if their business fails."
Mmm, I absolutely agree. Perhaps I should have grounded my statement somewhat more than I did.
I didn't mean Directors only put in as much work as their employees, I only meant they put in as much work actually -earning- the aforementioned gift from the supplier/client as any other member of staff did. So therefore that gift should be distributed amongst those who earned it (i.e. everyone).
11. At July 2, 2008 8:32 PM, J G Dawson wrote:
Personally, I can only applaud those who take a good whack out of their business as in the main I believe they deserve every penny and let those who dislike it start-up their own business - If they dare...
12. At July 9, 2008 1:31 PM, Kike Murray wrote:
Surely the issue here is that company directors are paying themselves wages which are well in excess of the kind of rises that their staff are getting. These people have nothing "invested" in these companies and are paid to run them rather than own them.
I have no issues with the owners of businesses reaping the rewards for their hard work, however company directors and MP's wages are in no way propotionate or justified in the real world.
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1. At July 1, 2008 11:40 AM, Chris Sabin wrote: