Shocking increases in Top Bosses earnings

Top bosses earnings

Top bosses earnings

According to an article in the Independent top bosses are now earning 143 times what workers’ get paid. This, says the article, has tripled over the past 15 years. That is a seriously huge gap in earnings. And remember, this is an average. There are obviously a bunch of CEOs getting more than this.

Why is this happening? Because they can. It’s that straight forward.

Here are some underlying reasons. Bound to be more of course.

Shareholder’s greed for profits. ?

Provided the CEO can deliver on huge returns to its shareholders, they don’t care about the inequalities of pay rates. Of course some shareholders themselves are at the mercy of their own shareholders in having to deliver high returns. After all most investors in companies or stocks are institutions themselves. These are pension providers, municipalities, hedge funds, investments companies such as Soros Fund Management or Warren Buffet’s Berkshire Hathaway company. And they have a gun at their head to deliver high returns to their shareholders.

A misconception that high salaries retain good staff

Many research papers have pointed out that high salaries is not the most important factor in employee retention. In fact most surveys point out that ‘making a difference’ is the prime motivator for employees.

In fact a recent article in Forbes has pointed out that employee’s who stay in companies longer than two years are making less on average every year than those staff members who move around more. This puts paid to the theory that high salaries retain good staff. You can earn more by jumping around.

No action by employees to change the status quo

There is overall no concerted action by the low paid employees to actually change that status quo. The main reason for this is probably fear that they will end up getting fired if they complain. Not only could they lose their jobs but could find it near impossible to actually get another one.

Of course one problem is that an employee with low level skills is easily replaced with hundreds waiting at the door to submit their CVs. One need only to see the queues outside factories or standing in line at employment offices. These are people who have limited skills or skills that are outdated. If you have a job, you are not going to want to jeopardise your position by complaining about how high the upper level salaries are.

An Old Boys Club

It’s not what you know but who you know. It’s an Old Boys club that runs the show. This is true whether in politics or in business. A high percentage of CEOs will have come from wealthy families, and/or will have worked their way through the elite schools and universities.

Of course there are entrepreneurs that have managed to found their own empires without help from family wealth or powerful educational institutions. Thinking Steve Jobs and Apple, or Bill Gates and Microsoft. But have a look at the big banks, investments institutions, big professional firms and see who is running these. Old names, old money, big connections.

As lowly employee it is almost impossible to rise above the rank and file. And this Old Boys Club is in fact another reason why women knock at that proverbial glass ceiling. They just don’t have the in into those Old Boys Clubs to easily allow them into the top management levels.

Does this mean that nothing will change? Probably not in the near future. Unless the workers can get some form of powerful base together to make a collective noise, nothing will change. The trade unions have certainly lost their bite and their ability to make a difference. Mainly one supposes because trades themselves are no longer required manufacturing having been pushed into developing countries where there are no trade unions.

Perhaps middle management unions need to be founded, sales or marketing unions, tech support unions or banking and investment staff unions just to note a few. Or just a general union of workers reporting to CEOs could do it.

Whatever solution can be found to address this disparity in salaries should be found soon before this gets out of hand. Or more so. One thing is certain. CEO’s will continue to pay themselves as much as they can get away with. It’s the nature of the beast.

How to change the world and other small goals

Occupy Wall Street protestor being removed

Occupy Wall Street protestor being removed

Occupy Wall Street didn’t make it. They didn’t really make a difference and the movement didn’t survive. In fact all that the Occupy movement got known for was untidy evictions from their various vantage points. Oh wait. They did manage to engineer the resignation of the Dean at St Paul’s in London. Success? Hardly.

Yet their message was incredibly important. Stop fat cat practices in the corporate world. Those practices that lead to indecent profits, huge CEO salaries and pittance pay to the people who make the organisation function. Those toilet cleaners, PA’s, support staff and more.

And sure. Warren Buffett‘s secretary earns over $100k per year. Seems a lot, but then look at the profits that his Berkshire Hathaway makes and you have to wonder about the unfairness of it. I am going to presume for the sake of the argument that the rest of the non investment broker staff also earn small salaries. Can’t see the cleaner getting more than $100k per year. Can you?

So what happened? Surely the stats of the top 20% of the population in the USA hold 89% of the wealth should be something that would ‘occupy’ the minds of the eighty percent of the USA that fight for the scraps of the wealth.

Perhaps a random idea is that the Americans are so used to thinking that everybody can make it in the USA and therefore if they are poor they can only blame themselves, surely. They just didn’t make it and they better be happy with their fate.

What the disenfranchised people in the developed world are forgetting is that they do have the power. They don’t actually need to think it’s their fault that they are not getting an equitable slice of the wealth cake. And perhaps one should not forget the developing world where the same inequalities are coming to the fore.

It was therefore great to see in Switzerland a move by the ordinary people taking back some of that power. The people voted overwhelmingly against high executive pay. Lead by one individual, Thomas Minder owner of a family-owned business, a tiny outrage ended up becoming a popular vote.

And that’s how it has to be done if you want to change the world. Messy occupy movements where people settle in tents on the fringe of financial district? No. A well thought through campaign that appeals to the ordinary people via legal and regular channels? Yes to that.

It surely applies to all of the changes that people want to make. Violence, riots, uprisings, demonstrations are not the way to do it. Even in the Arab world the uprisings have not really made a difference instead allowing lunatic fringe religious groups to run the show. Talk about a step back into the dark ages.

You want to make a change? Do it within the system. Just like the Swiss did. They changed the law. We can do that too. And with social media allowing us to talk so freely to each other and making it easy for tribes to get together it really isn’t necessary anymore to camp on the doorstep of the stock exchanges.

Jobs for everyone – don’t count on it

laborforceparticipationThere have been some interesting developments in the human resources space. The Yahoo CEO Marissa Mayer in particular has started a strong debate. Her call to bring back telecommuters into Yahoo’s offices has caused a lot of random hot air to circulate.

Whereas some companies have allowed their workers freedom to work from home Yahoo has now decided they want their staff back in the office. It seems positively old fashioned. Going backwards? Do we need to be physically together to produce the best work possible? And what about the cost to the environment and the back pocket for all the commuting to work.

But then another interesting article caught my attention. Reading about an innovative design studio based in Copenhagen and admiring their design work it was interesting to note that this award winning studio consists of two partners and one assistant. Sure they are a division of a larger agency, but their business unit is small.

How does this work? It can only work when the small unit can tap into an available freelance talent pool. And this is where work is ultimately going to. Just as this agency, Mega Design, is doing. They bring in talent when required. This means that you are never at risk with high overheads. You can expand or shrink according to the work load. It’s like having telecommuters on tap. Without the risk.

Of course there will still be the Yahoo, Facebook and Google’s out there who amass people in the hundreds and thousands. But where the big changes will happen will be in the small to mid size businesses. The ones that are most often knocked over by recessions. And the ones that used to employ those millions newly unemployed.

An interesting question was posed in a blog post recently. In response to the unemployment figures in the developed world that are not budging even though the recession is receding into history and the stock exchanges are posting highs not seen since before the crash a question was asked. (Taking the highs as an indication that the economies are doing well.)

And the question was: why are companies not hiring. Even though the economy is moving again and into positive figures. Why is there no hiring?

And probably the answer to this is that companies are going to do the very same thing that this design studio in Copenhagen is doing. Once they require staff they will outsource to freelancer on a per project basis because it’s safer. It’s a matter of keeping your overheads in sync with your project sizes.

The big headache of course is that young people coming out of formal education have been educated for the purpose of slotting into factory style work environments. Note that many hugely successful businesses out there have been started by people who never finished their post high school qualification. Steve Jobs springs to mind.

We are educating our youth for the wrong job market. There are only so many jobs at Yahoo or Google. The rest are going to have to become freelancers. Do they know how to run their own business, how to sell their services, how to keep their skills relevant so that they are marketable, network to find new business and the list goes on.

What else are we not providing our young people with? Relevant work place skills. A degree in English is not going to be enough for a regular copy writing job. And companies don’t have the budgets anymore to train up young people. This means our unemployed out there are the youth. Because on their first day at work all they can possibly do is make coffee for the boss. And there are no longer budgets for these skills.

 

 

Unemployment is not always about no jobs being available

The United Nations brought out a report on domestic workers at the beginning of 2013. An interesting statistic was that Spain is one of the top employers of domestic workers and most of them are foreigners. Hey what? The country with one of the highest unemployment numbers in Europe imports labour. About 2 million of them. That could make quite a dent in the millions that are currently unemployed.

So why do Spaniards not want to work as domestic workers? Well who does, one might even want to ask. After all there are umpteen jobs out there that nobody wants to do. Like for instance clean the floors in a supermarket, or stack shelves, or serve behind a counter. How mindless is that? How many times a day do you want to grab sausages, weigh them, put them in a packet and slap a price tag on it? And toilet cleaning?

It’s obviously not anything any self respecting person wants to do, surely.

And so it comes as somewhat of a surprise to see that ranked in number 5 place of the all time best companies to work for in the USA in 2012 is in fact a grocery chain. Yip. Their staff turnover is a low 3.6%. People love to work there. Regardless of whatever they have to do, and cleaning of toilets must be one of the tasks surely, nobody leaves their job. Because they love working there.

So it’s not actually about the type of work that one has to do that makes one want to work at something. It is all about a whole bunch of other stuff. In fact some serious research into wages and salaries has brought up that high rewards are really only necessary if the rest of the situation is unbearable.

It is probably safe to say that the counter staff at Wegmans, number 5 in the best companies to work for, are not earning Investment Banker bonuses. And at a loss of 3.6% the excuse these execs sprout of having to keep good staff and hence the high salaries doesn’t actually cut it either.

Of course high skills and knowledge are something one has to pay for. Cheating others out of money obviously requires skills. Oh wait, Investment Bankers don’t steal money, they just shuffle it around. To deserving individuals. My bad. (I’m sure there are a ton of highly skilled ethical bankers out there too. Regrettably their good deeds generally go unnoticed.)

Steve Jobs announces the end of the PC during his Keynote speech

So daughter and boy-friend went off to the WWDC (Apple Developer Conference). They build aps for gadgets so its a work conference they are attending. Very clever children that I have.

Tickets were very expensive. Sold out in a few hours. The queue for the Keynote address extended around a few blocks. Daughter was number 1904 in the queue half way through the process. Can you imagine that? People standing in line for a sales pitch? How many times have you done that. Not often I would imagine.

But then Apple is not your average company. And people will queue up to hear what the latest and most awesome stuff will be that will cost a lot of money and that people will camp overnight for outside the stores the day before launch.

In a way it’s not really surprising that Steve Jobs, famous CEO, would announce the end of the PC in said keynote. This is the message coming from one of the inventors of the personal computer and the company that makes the amazing laptops and desktops to die for. And yes I’m biased, typing this on a MacBook Air. (show off I know)

And that’s what is so incredible about this company and why its immediate future is secure. They have moved their enterprise away from their core business knowing and of course instigating at the same time that the PC will be dead. Well, ok still used by graphic designers, film makers and anybody else who needs powerful computing capacity.

But remember the PC market has depended on the man in the street for its phenomenal growth. Now that part of the market is about to migrate onto a hand held device. And I’m not talking the Air laptop either.

Before any of you with monitors on steroids start yelling me down let me just give you an example. I’ve been on computers since 1981. Yip. Little IBM square box with strange looking monitor. Using DOS. I’ve been used to working on at least a 15ins monitor.

Yet it took me less than half a day to adapt to my new machine the 11ins MacBook Air. It was amazing. Migrating to smaller monitors is not going to be an issue. Eventually with the iCloud on the horizon content will be in cyberspace. Tools will be online or stacked on your hand held gadget.

Our own in-house entertainment and communications system carried in our handbag. Oh did I mention that my Air fits into my handbag? Yip, she does.

However, it’s not only the courage of Apple to work towards phasing out computers that is amazing. It’s also their focused attention to detail that makes them such a successful company. This article on their 10 year celebration in the retail business is an eye opener.

The anniversary poster in their shops discusses what they have learned. And the obsession to detail that the company has is amazing. That’s truly a sign of a company that knows how to do it. Watch, notice, improve repeat ad nauseam. That’s one of the characteristics of successful companies and Apple has it in bucket fulls.

Good-bye PC. Hello total mobility. Can’t wait.

Hanging on to a losing proposition

USPS postal service.

There are many businesses in the world today which will cease to exist in a few years time if they stick to their current product offering that is a losing proposition. The postal service is one of these. Of course there are others too.

The last company making manual typewriters has just closed down as an example. Amazing how long they hung on. But then there would have been areas in this world where electricity was not available or only in limited quantity.

Still the postal service is one of those industries that we all know about. We’ve all sent a postcard or letter at some time in our lives. We’ve waited for mail to arrive bringing some important news. For many of the older generation who haven’t quite taken to messages via the internet, the physical postal service is still vitally important.

But even grannies are slowly understanding that sending a message via email or Facebook is so much easier. I used to post photos of the kids when they were babies to my parents living a continent away. I wouldn’t dream of doing that anymore.

We don’t even print out pictures anymore. Who carries those around when you can show them on a phone or iPad. Or just log onto the internet anywhere in the world and check them on Flickr or Posterous never mind your library on Facebook.

Yet when one reads about the large postal services such as the ones in the USA or the UK how they are struggling to remain profitable. An interesting article by Kid Dynamite discusses the US Postal Service and how they are hoping to survive.

The observation is that the USPS is trying to maintain its status quo by doing the same stuff it always has done. They are sticking to the existing game plan even when the writing is on the wall that postal deliveries are declining and that they are unlikely to come back.

But then isn’t that the world in general. How often do we push the same solution to a problem with the same bad results. Thinking outside the box isn’t easy. Many a company will close down because its people just can’t react to external threats effectively.

Theft from the people continues as bank executives cash in despite failure

The UK government’s bailout to the Royal Bank of Scotland Group PLC totaled £45.5 billion between 2008 and 2009. It became the costliest bailout of any bank worldwide.

It has to be said that the CEO who oversaw the rise and fall of RBS resigned a month before the proverbial hit the fan enjoying a lovely £700 000 pension per year.

The new CEO of Royal Bank of Scotland has probably not had an easy time of it, taking over a struggling bank at the start of 2009. But overall his success rate isn’t impressive. The bank reported an annual loss of £1.13bn (Billion) for the year of 2010. This follows on a £3.6bn loss for the year 2009.

So these figures don’t exactly look startlingly successful. Would you think? For the new CEO these could hardly be considered positive achievements. But then it could take some time to recover. One can understand.

But today his pay package for 2010 was announced. It’s a massive £7.7 million in total. Where does it happen one wonders where making an extraordinary loss can result in such a pay package? Massive financial compensation even though you have not delivered on your mandate.

Of course depends on the mandate. Maybe his mandate was to continue with making a loss? The world is upside down enough to have this happen. Especially in view of the fat bonus he is getting to do just that.

This CEO maintains that in order to attract the best people one needs to pay big sums. One could roll around on the floor laughing hysterically at this. What would you consider the best people for the job.

Would you consider the best person for the job the current Chief Executive Officer whose bank made a more than £1 billion loss in 2010 of a bank now owned 83% by the government?

Do these people really think that Joe Public is that stupid? Well obviously JP must be. Because at the end of the day Mr CEO will get his lovely bit of money.

Now one could argue with the principle that a business can pay what it likes to its staff. But this is no longer a private business. This is a business owned by the British People. They are the shareholders in this failing business. It is their tax money that is paying the Best Person for the Job his astronomical salary for making only a loss of £1 billion last year.

Shouldn’t the British people be outraged when somebody steals from them?

The petrol car vs the electric car

It is truly strange sometimes how things work out. The electric car or motor vehicle has been around for much longer than one would anticipate. It’s been showcased as this new thing to use. The answer in caring for  our environment. Modern, innovative etc.

However, what is interesting to note is that the electric motor car might have had a head start over the internal combustion engine propelled vehicle. The only reason why the petrol guzzling motor car won was because Ford invented the conveyor belt driven assembly line. It was just plain cheaper to produce the gas propelled vehicle.

Yet there will be folk out there who will swear blind that the petrol vehicle is the far superior mode of transport. Sure it is currently because all development money has been spent on this. What if the same kind of Research & Development investment that went into refining the petrol car had gone into the electric car?

Different story that altogether one would imagine.

It is amazing how a small thing can lead to such a huge change in direction. And how people can be hood winked into thinking this is how it should be. Always. Some interesting info on this point to be found here. And can you imagine what this would have done to the oil industry?

The PC and its spot in a museum

In November 2007 I wrote a blog post on the PC and that it should start reserving it’s space in a museum. I also posted this on the Mail & Guardian blog site to which I had been invited to contribute.

There were many comments on Thougtleader disputing my claims that the end of the PC would be sooner than later. Some comments were quite heated. Whatever for. I was just throwing an idea out. It even got me noticed and I ended up being interviewed on a podcast. Which was also fun.

Now there’s an interesting article on Spiegel about exactly the same topic in May 2010. And it’s all about a Post-PC-Age. Did I have a chuckle or what. But it’s totally in line with what’s logical.

As much as the PC or Mac has been a saviour in terms of communications, knowledge bank, storage system or entertainment amongst many uses the one thing that’s been a problem has been it’s portability.

Sure the laptop took care of that to a certain extent. However, at any one time, take out your laptop out of it’s special backpack/protective covering and it takes a fair amount of time to boot it up and get it going. Even the quick machines.

Add to that limited battery power and one can see that the PC is a make do gadget. We make do because it does provide a lot of uses. But we dislike the hassle with it. It’s a bit like buying petrol for the car. It’s actually a grudge purchase. We have to, so that the thing moves. Do we want to? Nah!

So we use the computer because it’s useful. But it’s awkward. And we reluctantly lug it around with us. No amount of style allows us to look elegant in business suite, power high heels and backpack. But there you have it. One must.

But for not much longer. The sign is finally here that the PC is definitely knocking on museum’s door. Those truly hand held devices (and yes Steve Jobs you did try with the Air) are coming. Yeah.

It’s one of the reasons why the iPad has been so surprisingly successful. It’s because users out there are desperate for a hand held techno gadget that does things for them. And yes it’s not doing enough things as yet, but the promise is there. Bring it on Jobs and Apple and third party app developers.

And they will. This gadget will be one of the new bits of technology that people will not leave their house without. In fact all you fashionistas out there start developing clothing items to port that bit of gadgetry. You won’t regret it. New take on handbags coming up right there.

So museums. Get that spot ready. PCs and Macs are coming your way as the new old technology ready to be show cased to the grand children. Look what your poor Gran and Granddad had to work with…. Bit like the old crank up phone. Those days are numbered.

Entitlement and not accountability for senior managers

More than half of Germany’s top management are members of  the wealthiest families of the country, that is they originate from the tiny .5% segment of the rich elite. A recent article in Spiegel provides the stats.

This kind of elitism brings with it certain problems. The belief in entitlement would be one of them. Top management is convinced it is entitled to the position by virtue of wealth and power.

One problem associated with the idea of entitlement would be a resistance to acquiring further knowledge. Top management feels there is nothing new to learn. After all they became the CEO through money rather than knowledge. No specific skills are brought to the position which means actually that anybody could do the job just as well or as badly as they do.

A further disadvantage is a tendency to disregard the workforce. CEOs who have arrived at their position through privilege rather than working their way up through the organisation are unable to relate to the work force as people. They become cost centres. And staff are treated as such.

Entitlement also fosters a closed shop mentality. Only those with the same pedigree need apply. This excludes women in most instances and of course anybody who might need to spell their name because their parents were not born in Germany.

The same kind of old boys club exists in the UK or in the USA. If you haven’t graduated from Oxford or Harvard don’t bother to apply for top management positions. And you have a better chance of getting into those Universities if you have the right background.

This kind of mindset is in all likelihood a major contributing factor to the inability of senior managers to take responsibility should their company fail. Financial bail-outs are just part of the entitlement. Why shouldn’t governments bail them out during economic tsunamis such as the recent recession.

It is this attitude that makes a CEO of a motor manufacturer fly in the company private jet, one of three owned by the company, to meet with government to ask for money to save the business. And when he is criticised for this rather outrageous extravagance he sulks and drives from Detroit to Washington to make his point of wounded innocence.

Does this not also explain the steep bonuses that are paid regardless of whether the business has been successful or not? Top management is so totally divorced from the actual business they have no understanding whatsoever that maybe a high bonus is not warranted.

The excuse that top staff would be lost if high rewards were not offered could be totally off the mark. Salaries and huge bonuses are paid because top management are convinced they are entitled to them. For no other reason!