London, despite the doom and gloom surrounding the stock market, remains a magnet for some of the best companies and business talent.
The FTSE 100 is an international index. Many blue-chip companies have significant overseas sales and operations; In some cases, their presence in the United Kingdom is minimal. A large number of companies listed in London have chief executives who come from abroad.
This is all great, but it complicates the debate over executive compensation.
In recent weeks, several CEOs, through their cheerleaders, have been campaigning for more money, believing they are underpaid by American standards.
They are holding investors to ransom with the implicit or explicit threat that, as full members of the global elite, they will leave the country if their demands are not met.
Negative company culture: The argument now is that Britain underestimates not only individual bosses but also companies.
The argument now is that Britain underestimates not only individual bosses but also companies. Whether or not the UK has a negative and reticent company culture is open to debate, but it is a popular view in elite circles and is being used as a weapon in an effort to drive higher salaries.
Hence the claim, made by one of AstraZeneca’s largest shareholders, that the pharmaceutical company’s CEO, Pascal Soriot, is not just underpaid, but “enormously so.” It’s true that French-Australian Soriot earned just £17m last year, less than the £21m his rival David Ricks made at US drug giant Eli Lilly.
It’s also true: he oversaw excellent share price performance, avoided what would have been a terrible takeover by Pfizer, and delivered a Covid vaccine. But most people’s reaction would probably be: take out the little violins.
There seems to be no awareness of how absurd it would be for most patients, or for the lowest-paid health professionals, to describe Soriot as someone marginalized.
As The Mail on Sunday reported, he is in line to earn £150 million during his career at the pharmaceutical company.
A considerable number of shareholders appear to have had similar sentiments.
About 36 percent voted against proposals to increase Soriot’s rewards, enough to put Astra on the official “List of Shame,” where more than 20 percent of investors oppose higher salaries.
A similar dispute is brewing at the London Stock Exchange Group, where CEO David Schwimmer, a New Yorker, wants a steep pay rise. He thinks he should be rewarded on par with the heads of big American data groups.
Rupert Soames, chairman of medical device maker Smith & Nephew, is trying to persuade shareholders to back a big raise for its chief executive, Deepak Nath. The argument is that more money is needed to stop Texas-based Nath from following a series of former S&N bosses who departed.
An entire industry has grown to devise and justify incredibly complex executive rewards. But most people don’t give a damn.
What they see is a group of entitled people already earning fabulous sums competing for even more obscene amounts.
Bosses’ compensation should be set by the market for top executives, not by a subjective view of the general public about how much an individual “deserves” it, compared to, say, a nurse.
But no market exists in a social and moral vacuum. The clamor to use American-style salaries to retain some undeniably brilliant executives should be weighed against the potential damage to trust among other constituencies.
Ignoring the opinions of customers, employees, investors – and in the case of big pharma, patients – is rarely a good idea.