Riassunto inglese articolo
riassunto di 'rewards of failure' articolo the economist:
WHEN the public mood changes, the realisation can take time to sink in. Behaviour that was once acceptable can overnight come to be seen as outrageous. The board of GlaxoSmithKline, a big pharmaceutical company, found itself this week at the sharp end of such a mood change: its shareholders voted to reject the company's remuneration committee report, which would have endorsed a two-year notice period for Jean-Pierre Garnier, its chief executive; paid him $35m if he lost his job; and treated him and his wife as three years older than they actually are for the purpose of boosting their pensions. This is the first year that shareholders in Britain have had the right to vote on the compensation committee's report, and the vote is purely advisory, with no binding force. But it leaves the company, with which, of course, Mr Garnier has a contract, in a sort of legal limbo. More important, it leaves boardrooms everywhere in a tizz. Suddenly, the discontent of institutional investors with large executive pay packages and poor corporate performance has found an outlet.
Company bosses have been slow to understand the new mood of outrage among shareholders. Institutional investors have for years accepted that bosses paid themselves more or less whatever they liked. So it is uncomfortable to face criticism. But behind the criticism is a strong feeling that many chief executives are living according to quite a different set of rules from ordinary mortals. Although the value of most large companies has shrivelled, the pay of their bosses has continued to rise; the value of their pensions has not collapsed; and they have struck lavish deals to cushion their fall if they leave.
Pay, yes, but only for performance
Some of the aspects of Mr Garnier's package that most irritated the shareholders were ones that appeared to reward, not superior performance, but simply being there. Lots of bosses have such components in their pay. Sometimes, they take the form of “golden hellos”: large sums simply for turning up to work. Sometimes, such packages are really tax-efficient ways of making other payments, such as buying a company from its owner by paying him partly in lifelong free medical treatment. It is hardly surprising that such deals are protected in the event of dismissal. However, to improve openness and to avoid appearing to reward failure, companies should be prepared to pay the price of a little less tax efficiency.
Of course, companies may strike bargains with bosses they want to unload in order to persuade them to go quickly and without a court case. They sometimes strike such deals with other members of staff. But a generous advance promise to reward failure is no way to encourage success. Like the “guaranteed bonus”, that boardroom contradiction, and the lifetime free dental treatment, it offers chief executives a one-way bet.
If the GSK vote makes companies cautious about such deals, that is welcome. The market for chief executives is deplorably imperfect. There is no rate for the job; positions are often discreetly trawled rather than openly advertised; and boardroom search committees rarely ask, “Could we get someone equally good even if we paid a bit less?” If the board now has to defend its compensation decisions publicly, it may be easier to say no. “We'd love to give you a golden parachute, old chap, but the shareholders would make a fuss.” More fuss, please, from shareholders. It's their company, after all.
grazie mille
WHEN the public mood changes, the realisation can take time to sink in. Behaviour that was once acceptable can overnight come to be seen as outrageous. The board of GlaxoSmithKline, a big pharmaceutical company, found itself this week at the sharp end of such a mood change: its shareholders voted to reject the company's remuneration committee report, which would have endorsed a two-year notice period for Jean-Pierre Garnier, its chief executive; paid him $35m if he lost his job; and treated him and his wife as three years older than they actually are for the purpose of boosting their pensions. This is the first year that shareholders in Britain have had the right to vote on the compensation committee's report, and the vote is purely advisory, with no binding force. But it leaves the company, with which, of course, Mr Garnier has a contract, in a sort of legal limbo. More important, it leaves boardrooms everywhere in a tizz. Suddenly, the discontent of institutional investors with large executive pay packages and poor corporate performance has found an outlet.
Company bosses have been slow to understand the new mood of outrage among shareholders. Institutional investors have for years accepted that bosses paid themselves more or less whatever they liked. So it is uncomfortable to face criticism. But behind the criticism is a strong feeling that many chief executives are living according to quite a different set of rules from ordinary mortals. Although the value of most large companies has shrivelled, the pay of their bosses has continued to rise; the value of their pensions has not collapsed; and they have struck lavish deals to cushion their fall if they leave.
Pay, yes, but only for performance
Some of the aspects of Mr Garnier's package that most irritated the shareholders were ones that appeared to reward, not superior performance, but simply being there. Lots of bosses have such components in their pay. Sometimes, they take the form of “golden hellos”: large sums simply for turning up to work. Sometimes, such packages are really tax-efficient ways of making other payments, such as buying a company from its owner by paying him partly in lifelong free medical treatment. It is hardly surprising that such deals are protected in the event of dismissal. However, to improve openness and to avoid appearing to reward failure, companies should be prepared to pay the price of a little less tax efficiency.
Of course, companies may strike bargains with bosses they want to unload in order to persuade them to go quickly and without a court case. They sometimes strike such deals with other members of staff. But a generous advance promise to reward failure is no way to encourage success. Like the “guaranteed bonus”, that boardroom contradiction, and the lifetime free dental treatment, it offers chief executives a one-way bet.
If the GSK vote makes companies cautious about such deals, that is welcome. The market for chief executives is deplorably imperfect. There is no rate for the job; positions are often discreetly trawled rather than openly advertised; and boardroom search committees rarely ask, “Could we get someone equally good even if we paid a bit less?” If the board now has to defend its compensation decisions publicly, it may be easier to say no. “We'd love to give you a golden parachute, old chap, but the shareholders would make a fuss.” More fuss, please, from shareholders. It's their company, after all.
grazie mille
Risposte
Mi auguro possa esserti ancora utile:
Public mood changes take a while to sink in. Behaviour that was once acceptable can overnight come to be seen as outrageous. The board of GlaxoSmithKline, a pharmaceutical company, witnessed the results of such a mood change. Its shareholders voted against the company's remuneration committee report It would have endorsed a two-year notice period for Jean-Pierre Garnier, its chief executive; paid him $35m if he lost his job; and treated him and his wife as three years older than they actually are to boost their pensions. This is the first year that shareholders in Britain have had the right to vote on the compensation committee's report. The vote is purely advisory. But it leaves the company and Mr Garnier, in a sort of legal limbo, as well as it leaves boardrooms everywhere in a tizz.
Company bosses have been slow to understand the new public mood. Investors have for years accepted that bosses paid themselves more or less whatever they liked, leading to the present criticism. Though behind it is a strong feeling that many executives are living according to a different set of rules. As company shrivel, their bosses’ pay rises, amongst other things.
It’ pay to perfom.
An aspect of Mr Garnier's package that most irritated the shareholders was him simply being awarded for 'being there', not for ny superior performance. Sometimes these are really tax-efficient ways of making other payments It is hardly surprising that such deals are protected in the event of dismissal. However, companies should be prepared to pay the price of a little less tax efficiency.
Companies may strike bargains with bosses they want to unload in order to persuade them to go quickly and without a court case. They sometimes strike such deals with other members of staff. But a generous advance promise to reward failure is no way to encourage success.
If the GSK vote makes companies cautious about such deals, that is welcome. The market for chief executives is imperfect. There is no rate for the job; positions are often discreetly trawled rather than openly advertised; and boardroom search committees rarely ask, “Could we get someone equally good even if we paid a bit less?” If the board now has to defend its compensation decisions publicly, it may be easier to say no. “We'd love to give you a golden parachute, old chap, but the shareholders would make a fuss.” More fuss, please, from shareholders. It's their company, after all.
Public mood changes take a while to sink in. Behaviour that was once acceptable can overnight come to be seen as outrageous. The board of GlaxoSmithKline, a pharmaceutical company, witnessed the results of such a mood change. Its shareholders voted against the company's remuneration committee report It would have endorsed a two-year notice period for Jean-Pierre Garnier, its chief executive; paid him $35m if he lost his job; and treated him and his wife as three years older than they actually are to boost their pensions. This is the first year that shareholders in Britain have had the right to vote on the compensation committee's report. The vote is purely advisory. But it leaves the company and Mr Garnier, in a sort of legal limbo, as well as it leaves boardrooms everywhere in a tizz.
Company bosses have been slow to understand the new public mood. Investors have for years accepted that bosses paid themselves more or less whatever they liked, leading to the present criticism. Though behind it is a strong feeling that many executives are living according to a different set of rules. As company shrivel, their bosses’ pay rises, amongst other things.
It’ pay to perfom.
An aspect of Mr Garnier's package that most irritated the shareholders was him simply being awarded for 'being there', not for ny superior performance. Sometimes these are really tax-efficient ways of making other payments It is hardly surprising that such deals are protected in the event of dismissal. However, companies should be prepared to pay the price of a little less tax efficiency.
Companies may strike bargains with bosses they want to unload in order to persuade them to go quickly and without a court case. They sometimes strike such deals with other members of staff. But a generous advance promise to reward failure is no way to encourage success.
If the GSK vote makes companies cautious about such deals, that is welcome. The market for chief executives is imperfect. There is no rate for the job; positions are often discreetly trawled rather than openly advertised; and boardroom search committees rarely ask, “Could we get someone equally good even if we paid a bit less?” If the board now has to defend its compensation decisions publicly, it may be easier to say no. “We'd love to give you a golden parachute, old chap, but the shareholders would make a fuss.” More fuss, please, from shareholders. It's their company, after all.
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