Business

DEBATE: Should companies link executive and employee pay more closely?

Should companies link executive pay more closely to that of ordinary employees?

Rachel Reeves, Labour MP and chair of the Business, Energy and Industrial Strategy Committee, says YES.

When a business does well, workers should share in the rewards, not just the boss. Too often, superstar salaries are waved through by remuneration committees that pay too little attention to whether the chief executive is investing for future success or delivering long-term value.

But if companies ensure fairer rewards across their business, they will benefit from better workforce morale and productivity.

Greater use of profit-sharing schemes would bind executives and the rank-and-file closer together in delivering success, while more transparency on pay ratios would shine a light on companies failing to do the right thing.

Remuneration committees should also have at least one worker on their boards, to bring some welcome challenge to the often-cosy arrangements on executive pay.

Eye-watering pay packages damage trust. By linking executive pay more with rewards for workers, companies can help repair the reputation of business and deliver long-term success.

Eamonn Butler, director of the Adam Smith Institute, says NO.

Executive remuneration should be decided by the owners of a company, not by politicians.

Owners base remuneration on their assessment of the value that executives generate for the firm and the pay required to attract talent, not on whatever politically correct statistic happens to be in vogue.

Performance-based pay encourages the creation of value that is beneficial not just to the owners and executives, but to workers, customers, and the economy as a Read More – Source

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