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FT editor Roula Khalaf has chosen her favorite stories in this weekly newsletter.
The author of How to Become a Better Leader is a visiting professor at Bayes Business School, City, University of London.
“That’s a ball you can use.” . Pascal Soriot is free at the far post. . . Great header! One zero for AstraZeneca. ”
Fantasy football has never gone this far. But last week Sir Michael Spencer, founder of brokerage firm ICAP, suggested that chief executives should be in line with Premier League footballers on remuneration.
“We don’t mind paying extraordinary amounts of money to elite football players,” Spencer said. But when a similar figure is proposed to UK-based CEOs, “everyone jumps and says, ‘This is outrageous.’
His comments come amid concerns that top wages in the FTSE 100 lag behind the US, leading to an exodus of talented leaders from British companies. Median compensation for S&P 500 CEOs last year was $16 million. The FTSE 100 equivalent was £4.1m, but many US companies are much larger.
Those who lead listed companies have big jobs that come with great responsibilities. But Spencer made a mistake when he tried to link the performance of a top sports star to the job of a corporate executive. You cannot compare like with like.
Soccer fans can see very clearly how well their team is playing and who is contributing what to success or failure. For CEOs, it’s less clear. Of course leadership is important. However, in large, complex organizations, hundreds or even thousands of people make important contributions. Disproportionally huge pay for one person at the top has more in common with fairy tales than with hard-headed performance management. We also face more than 30 years of debate about corporate governance and how best to guide and manage companies.
Post-mortems conducted after recent corporate scandals often find the blame lies with powerful or autocratic CEOs who lack adequate checks and balances from other senior colleagues. Antidote? collective leadership and shared responsibility, not a continuation of the myth of the heroic soloist boss. “Leadership is a team sport,” INSEAD Distinguished Professor Manfred Kötz de Vries reminded me at the annual Drucker Forum in Vienna last month.
The truth is, CEOs and sports (or movie) stars have very little in common. First, corporate performance is affected by a variety of factors, some of which are beyond anyone’s control. If you’re in a “hot” sector or selling a product whose price has skyrocketed, congratulations! Salaries linked to stock prices will also rise.
Luke Hildyard, director of the High Pay Centre, a think tank that studies these issues, said four of the five biggest pay rises given to FTSE 100 CEOs last year were at companies in the oil and gas industry. He pointed out that it was carried out by, and summarized it. The arms manufacturing industry benefited from Russia’s invasion of Ukraine. “It is not serious to suggest that the performance of these companies was influenced by the leadership of their CEOs in the same way that Manchester City’s success was influenced by Erling Haaland’s 52 goals,” he said. .
The difference goes even deeper. Football supporters follow the successes of individual players and take an interest in the ups and downs of their teams, but that’s because they “often feel like it’s their club,” says the organizational development consultant and professor who oversees Premier League football clubs’ seasons. said John Curran, who is also a ticket holder. crystal palace.
CEOs, on the other hand, are “not in front of the employees” and “are not rewarded with the same status,” he observes. For that matter, customers and clients. While some top “celebrity” CEOs have become more visible and accessible to stakeholders, most are fairly anonymous. Curran said: “They lurk in remote spaces of isolated power, the boardroom, removed from reality.”
There is another flaw in Spencer’s argument. FTSE 100 CEOs already outperform Premier League footballers in terms of pay. According to research by the Financial Times, the average annual salary for a Premier League player is around £2.1 million, around half of what the average FTSE 100 manager receives.
With that in mind, shareholders may be wise to adopt accountability measures from the football world. If a CEO feels he’s not getting paid, he could repeat the chant that echoes across the terraces when a superstar deal doesn’t live up to the hype. “What a waste of money!”
