Mythbuster: are huge executive pay packages really vital to UK competitiveness?

Mythbuster: are huge executive pay packages really vital to UK competitiveness?
Document type
Report
Corporate author(s)
High Pay Centre
Publisher
High Pay Centre
Date of publication
22 July 2013
Subject(s)
Trends: economic, social and technology trends affecting business, Management & leadership: including strategy, public sector management, operations and production
Collection
Business and management
Material type
Reports

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As part of the New Economics Foundation's mythbuster series, this report analyses the arguments put forward to justify the growth in executive pay packages over the past thirty years, finding that there is little evidence to support them. The report argues that:

  • The risk of executives moving overseas is greatly exaggerated - less than 1% of the world's biggest companies have lured the CEO of an overseas rival with an increased pay package.
  • There is little evidence to support the idea that there is a finite pool of irreplaceable company leaders - internally-promoted executives, nurtured by strong personal development programmes, tend to perform better than supposed superstars recruited from external competitors.
  • For all the talk of 'performance related pay' the rapid growth in executive pay packages - driven by huge increases in bonuses and incentive plans - has brought about little improvement in company performance.

The paper concludes that these ‘myths’ greatly exacerbate levels of socially-divisive inequality in the UK, while the increased share of the national income captured by the richest 0.1% diverts wealth from low and middle-income households.

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