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On Wednesday 31 May, it was reported that Alex Mahon, CEO of Channel 4, could receive record annual pay of £1.4m. This article was originally published on 26 April 2021 and asks, as Executive pay continues to rise, does a company need a CEO at all?
Over the next two weeks, the boards of BAE Systems, AstraZeneca, Glencore, Flutter Entertainment and the London Stock Exchange all face the possibility of shareholder revolts over executive pay at their forthcoming annual general meetings (AGMs). As the AGM season begins, there is a particular focus on pay.
Executive pay is often the most contentious item at an AGM, but this year is clearly exceptional. The people running companies that have been severely impacted by Covid-19 can’t be blamed for the devastation of their revenues by the pandemic, but they also can’t take credit for the government stimulus that has kept them afloat. Last week, for example, nearly 40 per cent of shareholders in the estate agents Foxtons voted against its chief executive officer, Nicholas Budden, receiving a bonus of just under £1m; Foxtons has received about £7m in direct government assistance and is benefiting from the government’s continued inflation of the housing market. The person who has done most to ensure Foxtons’ ongoing good fortune is not Nicholas Budden but Rishi Sunak.
Under the Enterprise and Regulatory Reform Act, executive pay is voted on at least every three years, and this process forces shareholders and the public to confront how much the people at the top take home. Tim Steiner, the highest-paid CEO in the FTSE 100, was paid £58.7m in 2019 for running Ocado, which is 2,605 times the median income of his employees for that year, while the average FTSE100 CEO makes more than £15,000 a day.
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As the High Pay Centre’s annual assessment of CEO pay points out, a top-heavy wage bill extends beyond the CEO, and could be unsustainable for any company this year. “When one considers high earners beyond the CEO”, says the report, ”there is actually quite significant potential for companies to safeguard jobs and incomes by asking higher-paid staff to make sacrifices”.
In the longer term, as companies commit to greater automation of many roles, it’s pertinent to ask whether a company needs a CEO at all.
A few weeks ago Christine Carrillo, an American tech CEO, raised this question herself when she tweeted a spectacularly tone-deaf appreciation of her executive assistant, whose work allows Carrillo to “write [and] surf every day” as well as “cook dinner and read every night”. In Carrillo’s unusually frank description of the work her EA does – most of her emails, most of the work on fundraising, playbooks, operations, recruitment, research, updating investors, invoicing “and so much more” – she guessed that this unnamed worker “saves me 60% of time”.
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