Why CEOs make so much money – BBC News

Pryor points to the examples of Steve Jobs at Apple, Jeff Bezos at Amazon and Elon Musk with Tesla and SpaceX, exceptional talents who’ve forged revolutionary technologies from the ground up. Yet a number of researchers say that the role of the average CEO – a managerial type that hasn’t founded the business and hasn’t been a visionary – is overstated. Rather, other factors are more important in deciding the fortunes of a company.

“There are several reasons a company can perform well,” says David Bolchover, a management-pay expert who wrote the book Pay Check: Are Top Earners Really Worth It?. “Maybe the economy or their sector is buoyant, which has nothing to do with the CEO, maybe they operate in an oligopoly. It could be the contribution of workers. The impact of a CEO on company performance is not measurable, which is the nub of the issue. They have this ‘talent ideology’ to justify this. But is their ability so rare? I think it’s a con.”

Bolchover says the 2008 global financial crisis is a prime example of how performance and pay don’t always align. “The financial sector always defended their high pay on the basis of their rare abilities and their talent,” he says. “But a lot of these banks went bust during the crisis, and people started to ask questions – why were they paid so much and why did they continue to be paid so much even after the crisis?”

According to Bolchover, the “vortex of self-interest” between shareholders, board members and executives is why CEO pay has not dipped – and, for him, that is why there is growing pressure from the general public.

‘A dramatic step forward’

While top-brass pay keeps sailing on, employee rights seem to be on a downward trajectory – especially for front-line staff amid the pandemic. For many average workers, these huge numbers have become an increasingly bitter pill to swallow.

Workforce anger at this pay disparity spilled over earlier this month when thousands of employees at British Gas went on a five-day strike in response to plans to reduce the workforce and shift employees to new contracts with fewer rights. Tensions had already been boiling since 2018 after the chief executive of Centrica, the company which owns British Gas, received a 44% pay rise to £2.4m.

Leave a Reply

Your email address will not be published. Required fields are marked *