” What we know is a drop; what we don’t know is an ocean”. Isaac Newton
Good news about executive pay in the US
A new federal rule will require public companies to list their chief executives’ total annual compensation as a ratio to their workers’ median pay, after the Securities and Exchange Commission adopted the rule, required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The agency received more than 280,000 public comments in support of the pay ratio rule.
BUT! There has to be a “but”!
– the rule gives companies discretion on how to interpret the measure, under which many public companies must publish “the ratio of the annual total compensation of the chief executive officer to the median of the annual total compensation of the company’s employees.”
– companies are given leeway on determining their median employees’ pay, such as provisions that allow them to use statistical sampling to define the compensation of their median employees once every three years.
– excluded from the requirement are “emerging growth” and small companies, defined as those with less than $1 billion in annual gross revenue. (You have to be joking! A billion dollars! Ed.)
Critics of the rule say it would impose an expensive new bookkeeping requirement on companies. To which I would reply, “only if you have no computers and do your accounting using a quill pen and indian ink”. Any competent software writer could devise a program for producing the necessary figures within a couple of days. How the
But at least the new rule encompasses the banks and big financial organizations, which was the original point. So – a qualified hooray. (based on an NPR report August 2015)
Thought for the day
If the chief thought at the back of your mind is wondering what other people think of you, then you have your priorities drastically wrong and your life is in a muddle. (paraphrasing Nigella Lawson)
New American overtime rules – will they work?
A proposal by President Obama would make 5 million more Americans eligible for overtime pay. At the moment those earning $36,660 or under are paid overtime, but the administration wants to increase that to $50,440. Advocates of this change say it’s long overdue. They say workers are often misclassified as “managers” to avoid paying overtime.
The Fair Labor Standards Act is designed encourage companies to hire more workers, instead of squeezing work out of the workers that they have. But many “managers” earn well below $50,000, and if they get overtime it may be seen as a demotion and a disincentive. In some cases exploitative employers will increase salaries just to the level where overtime is not required. In others “managers” will leave and get hourly paid jobs with overtime. As one manager is quoted as saying, a propos to being salaried:
“As a salaried employee you are signing off to a degree for indentured servitude, going above and beyond with no additional compensation.”
Traditionally, wage earners are not expected to progress to management. Or if they are promoted then they go onto fixed salaries. Companies say that this is the ladder to preferment. It’s the same in Europe. But if companies have to increase salaries they might cut out a whole level of management. All these changes are tricky, but at least Obama is trying to do something for ordinary people!
Over-management
To the Financial Times
While it is heartwarming to see the concern of Simon Walker of the Institute of Directors for other countries struggling to rebuild their economies, perhaps he may like to address a problem closer to home. The UK has twice as many managers (which includes directors) in proportion to total employment as the average for the rest of the EU. This is not matched by twice the gross domestic product per head.
Promptly shedding the surplus 1.6 million, presumably without extended notice periods and excessive severance pay, should directly improve overall productivity and cut the employment cost in the UK economy by perhaps around £80bn a year. Subsequent re-employment as direct labour should add output.
Ian Gascoigne, London
Good letter! You see this everywhere, starting with the people in suits, carrying clip-boards, in the supermarket. “Managers” everywhere . Inventory control is computerized these days, or should be, but there they all are, looking important, wandering around , being asked where the customer can find the yogurts and so on, while apparently checking the stock of baked beans.
Empire building is as old as human history. The trick is not to have the buck stop with you, so you ensure that there is an assistant manager beneath you to take the blame. In turn, he/she finds an ingenious reason for why the burden of work is too great, and in no time you have an assistant-assistant manager. But when you want to phone or email a company to complain about something you get a half- trained newcomer who can tell you the name of her supervisor, and who has to deal with all complaints, poor kid. Management is AWOL when it comes to interacting with customers.
In America the only known qualification for being a manager is being able to speak Spanish, so that you can supervise the poor people on an unliveable minimum wage. Otherwise, American managers are “missing in action” as well. So I agree with Mr. Gascoigne (above). Fire a whole load of them – and raise that minimum wage.