Mafia-like fat cats are a PR disaster

The odd thing about executive pay is that the executives don’t need it. All the research shows that people who get to the top are driven by a need to succeed.

Anecdotal evidence supports this. Most of the ones I know would be mortally offended if it were suggested to them that they need millions of pounds and shed-loads of incentives to do a proper job. If the vast rewards they demand serve any purpose, it is to put them above other chief executives in rival companies, to enhance their peer group status.

In years to come we may well look back on this period as the era when we decided we’d had enough of capitalism. This country has never been totally convinced about it anyway – we don’t like its rough edges and feel a lot of things are better run by the state on a not-for-profit basis. If British business were a PR account, no one with any reputation of their own would touch it.

Executives are demanding the rewards of the entrepreneur without taking the entrepreneur’s risks. The firms briefly under their control were inherited and their stewardship should be aimed at enhancing them for generations to come.

One theory is that the business schools are to blame for this mess. Seeking to turn their mumbo-jumbo into a science, they downplay the personal aspects of management and the role of human choice in framing decisions. Instead, they elevate pseudo-scientific concepts such as shareholder value, agency theory and transaction cost economics. This has allowed managers to grab ever-larger slices of the loot because they are behaving as text books decree. Taking their cue from the Mafia, the greed is not personal, it is business.

But the executives’ refusal to acknowledge the human dimension, and their willingness to act utterly without shame, means they are steering business unerringly onto the rocks of a major PR disaster. If they carry on like this, the backlash is as inevitable as it will be unpleasant.

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