CEO

CEO bonuses: how they impact us all

The major failure of corporate governance and purpose in Britain manifests itself in the often ludicrous levels of CEO compensation. In this post I explore the impact of these on us all.

I found it interesting that Abigail Disney, great-niece of Walt, found time to call out a pay award of $65.6m. The recipient of the award is Disney’s boss, Bob Iger.

Not that she felt he didn’t merit a bonus for his management skill. Rather, it was the size of his reward she objected to:

To put that gap in context, in 1978, the average CEO made about 30 times a typical worker’s salary. Since 1978, CEO pay has grown by 937 percent, while the pay of an average worker grew just 11.2 percent

Above all, she’s right.

Balancing CEO pay

Chief executive pay, both in the UK and in the US, has become divorced from any balance between risk and reward. For example, take Walt Disney. An artistic and business genius, he built an entertainment empire from scratch. Also, he stood to lose everything if it failed. Now contrast this against Iger. At the most basic level, Iger is an employee whose great rewards were never balanced by personal risk.

When he and other CEOs get obscene windfalls, it makes capitalism stink. It plays into the hands of people such as our shadow chancellor, John McDonnell. McDonnell plans to expropriate ordinary shareholders in big companies.

Firms who fail to exercise proper judgement over bosses’ pay should beware. The resulting outrage and disillusion will cause the public to judge them. And the result likely won’t be to their advantage.

Photo by Razvan Chisu on Unsplash

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