Most people would agree that something has gone wrong with the levels of pay enjoyed by senior executives.  Certainly, it would seem that the remuneration for top people is not in line with public sentiment. Anyone who has ever been to the annual shareholders meeting of a large business will know just how vexed an issue it is.  They do, of course, get a vote.  The floor of the meeting unanimously votes against the directors pay resolution only to see that the, often absent, institutional shareholders have already voted in favour. So, where did it all go wrong and does it actually matter.

Ironically, it all went wrong for the right reasons.  Institutional shareholders wanted to encourage two things in company leaders: shared ownership (called, rather unpleasantly, ‘skin in the game’) and long-term thinking.  This is now the root of the real problem.  Of course, the six figure basic packages are too high relative to the average employee, but it is the share scheme packages that create the real disparity, resulting in multi-million payouts over a number of years.

So why is pay so high?  There are three main reasons, two of which are based on myths.  Firstly, that there is a global market for leaders.  The evidence would suggest that most people live and work in their home countries.  There is, and always has been a small cadre of international CEOs, but most aren’t.  It reminds me of the great Sir Thomas Beecham who once said “Why do we have to have all these third-rate foreign conductors around when we have so many second-rate ones of our own?”

The second myth is that leaders are special people who have unique skills that are transferable across both companies, countries and sectors. Well, I’ll leave you to ponder on that.  But on the whole the solutions to issues and the people to solve them already exist in most organisations.  Therefore, it is more effective and sustainable to create the climate in which change can flourish from within rather than in parachuting in superstars from outside.

The third reason why pay is so high is because of the rather incestuous relationship between remuneration committees aided and abetted by pay consultancies.  Some business journalists in the past have mapped the network of who sits on whose board.  The result has been an arms race of back-scratching where the down side of failure is irrelevant to people who have already built up multi-million shareholdings and pension funds.

But does any of this matter beyond a general feeling of unfairness?  Well, it does serve to underline why the levels of trust towards leaders is so low and why so few employees actually listen to what their leaders are saying.  Clearly whatever leaders say to their employees, they’re not all in it together.  This is never more important than during times of change when the disproportionate nature of risk and reward is at is most acute.

And what to do about it?  Well, as the old joke goes, I wouldn’t start from here.