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FT editor Roula Khalaf selects her favorite stories in this weekly newsletter.
The writer, author of ‘How to Be a Better Leader’, is a visiting professor at the Bayes Business School of the City of the University of London.
“That’s a useful ball in . . . Pascal Soriot stands out at the far post. . . great header! One to zero for AstraZeneca.”
Fantasy Football never came this far. But last week Mr Michael Spencerfounder of brokerage ICAP, suggested that chief executives should be aligned with Premier League footballers in terms of what they are paid.
“We don’t mind paying our footballers, top-level footballers, extraordinary amounts of money,” Spencer said. But when similar figures are proposed for UK-based chief executives, “everyone jumps up and says this is a scandal”.
The context of his comments is the concern that the highest wages in the world The FTSE 100 lags behind the US driving to a loss of talented leaders of UK companies. The median salary for S&P 500 CEOs was $16 million last year. The equivalent figure in the FTSE 100 was £4.1m, although many US companies are much larger.
Those who run public companies have big jobs with big responsibilities. But Spencer is wrong when he tries to make a connection between the performance of the sport’s biggest stars and the work done by corporate executives. There is no comparable comparison.
Soccer fans can see very clearly how well their team is playing and who contributes in what way to success or failure. With CEOs, it’s much less clear. Of course leadership matters. But in a large, complex organization, hundreds and even thousands of people make a crucial contribution. The disproportionately large reward for a person at the top has more in common with the realm of fairy tales than with stubborn performance management. It also flies in the face of more than three decades of debate about corporate governance and how best to lead and manage companies.
In post-mortems carried out after the corporate scandals of recent years, the blame has often been found to lie with overly powerful or dictatorial CEOs, who were not sufficiently checked or balanced by other senior colleagues. The antidote? Collective leadership and shared responsibility, not a continuation of the myth of the heroic solo boss. “Leadership is a team sport,” as Manfred Kets de VriesI was reminded by a distinguished INSEAD professor at the annual Drucker Forum in Vienna last month.
In truth, CEOs have little in common with sports (or movie) stars. For one thing, corporate results are affected by a variety of factors, some of them beyond anyone’s control. If you are in a “hot” sector or sell a product that has skyrocketed in price, congratulations. Salaries tied to stock prices will also skyrocket.
Luke Hildyard, director of the High Pay Centre, a think tank that studies these issues, summed it up when he pointed out that four of the five biggest pay rises awarded to FTSE 100 chief executives last year were made by companies in the oil sectors. and the gas or weapons manufacturing industries, which benefited from the Russian invasion of Ukraine. “It is not serious to suggest that the performance of these companies was driven by the leadership of chief executives in the same way that Manchester City’s success depended on Erling Haaland’s 52 goals,” he observed.
The differences are deeper. Soccer fans follow the successes of individual players and are interested in the ups and downs of teams, “because they often feel like it’s their club,” says John Curran, an organizational development consultant, teacher and season-ticket holder at the soccer club. Premier League football. Crystal Palace.
CEOs, on the other hand, “are not rewarded with the same status,” he observes, since they are “not on the employee’s mind.” Or clients or clients, in any case. While some of the top “celebrity” CEOs have become more visible (and accessible) to stakeholders, most are fairly anonymous. As Curran puts it: “They hide in the distant space of independent power – the boardroom – and away from reality.”
There is another flaw in Spencer’s argument. FTSE 100 CEOs are already doing better than Premier League footballers in terms of pay. The average annual salary of Premier League players is around £2.1m, according to Financial Times research, around half of what the average FTSE 100 boss receives.
With this in mind, shareholders would do well to adopt a measure of accountability from the football world. If they feel a CEO isn’t earning his rewards, they might repeat the chant that echoes through the stands when a superstar signing fails to live up to expectations. “What a waste of money!”