Editors Blog

As a man of the media I always cringe slightly when a "media storm" begins.

Unless you are one or are married to one, you're unlikely to like fat cats. It's no big deal. Why the surprise?

The storm surrounding ex-RBS chief executive Sir Fred Goodwin's massive pension feeds off this hatred.

I don't think Sir Fred deserves his pension. But rather than saying "that's disgusting" or "grotesque" when hearing he's earning £13.3k per week, we need to answer some pretty tough questions...

I've been out mixing with reward experts at two of the City's big four accountants over the past week.

Both highlighted the position that many employers find themselves in, staring at a growing cost to the defined benefit (DB) pension scheme with little alternative other than to close it to new AND existing staff.

Sophie Black, director of reward and performance at Ernst and Young, said for businesses, now was the time to make changes to pension terms and conditions.

"Many staff are too concerned with potentially losing their jobs, which can play into the hands of employers looking to reduce costs," she said.

She was echoed by Jon Terry, head of reward at PricewaterhouseCoopers, who added that there was big news expected in the coming months about several large FTSE companies closing their DB schemes.

"It's not the death knell for DB schemes, however, but the disparity between public and private sector pensions will continue for the foreseeable future," he said. "The impact this will have on DB pensions as a whole will be big, and likely not positive for any party on either side of the divide."

Half of DB pensions are expected to close to new joiners this year, but both experts hinted at a number of DB pensions closing to existing staff as well because of the recession.

Also expected are total reward rethinks as companies look to reduce the number of flexible benefits on offer in place of more specialised (and minimum-cost) benefits.

The phrase ' shutting the stable door after the horse has bolted' springs to mind, but the CIPD has published what it calls "general principles" on executive pay.

They have been designed to act as a framework to help HR directors and remuneration committees when developing policies, practices and structures for executive pay and reward. The CIPD has consulted with reward experts and drawn up 10 principles "intended to stand the test of time, rising above some of the excessively heated aspects of the current debate on executive reward".

Charles Cotton, CIPD reward adviser, says: "There's been an awful lot of heat, and not a lot of light in the debate about executive pay and bonuses. Unfortunately, the issue has been reduced to a slanging match around how much executives earn. 

"We need to move beyond this - organisations should focus their attention on what they need to do to ensure their reward packages support the needs of the business and its stakeholders, and to attract and retain the talent the business requires."

Cotton says the principles represent the CIPD's view on how executive remuneration should be structured, irrespective of an organisation's sector or business model.

Click here to read the 10 principles on the CIPD website.

 

The furore over unfair bonus payments continues - only this time the focus is not on bankers but the HR institute's own chief executive, Jackie Orme, for accepting a bonus payout estimated to be in the region of £60k.

Ironically, the CIPD has found itself in the unenviable position of having to justify its very own chief exec's bonus to the HR profession, hot on the heels of the launch of its own guidelines for HR on executive pay "aimed at rising above some of the excessively heated aspects of the current debate on executive reward". 

Back in February, Orme told Personnel Today that HR should be leading the culture change on bonuses. And most would agree with her sentiment. But now news of her own payout has sparked a row - clearly a bitter pill to swallow in light of recent CIPD redundancies, a ban on discretionary bonuses and pay freezes endured by other staff at the institute. 

Disgruntled employees are often quick to take a pop at their organisation's leader. And debate  has been raging in Personnel Today's community forum HR Space, with accusations that the CIPD leader has taken an "I'm alright Jack" approach and commentators questioning whether it was right to accept the payment, regardless of whether targets were met. (Join the debate at HR Space)

It's yet another warning for HR and reward professionals to make bonus payments fair and transparent, and look to cancel executive incentives if the general bonus plan doesn't pay out. In these tough times, demands for fairness come to the fore. 

Pressure has been building on CIPD chief executive Jackie Orme ever since Personnel Today revealed she has been paid a hefty bonus while her employees have suffered a pay freeze, bonus ban, redundancies and cuts to other benefits.

Now others in the HR community, and not just peeved CIPD employees, have come out to say the decision to award her bonus and, more importantly, Orme's decision to accept it, is plain wrong.

In fact, they go as far to say she should hand it back. No word on this from Orme herself, she has refused to comment on the bonus story from the outset, preferring to let others at the institute justify the decision.

CIPD president Vicky Wright - who also chairs the remuneration committee that signed off Orme's bonus (rumoured to be in the region of £60,000), - put forward the ludicrous argument, dutifully trotted out by the CIPD's house magazine People Management, that paying her was 'good practice'.

In my view, supported by comments from senior HR figures in Personnel Today, regardless of whether Orme was entitled to a bonus, she should have declined it. She could have even have spun the story into some good PR; pushing the line that she refused to accept the bonus as she recognised the tough year the CIPD and its employees had gone through.

There are two other things which make the situation even more embarassing for the CIPD; first, the fact it published just days earlier new guidelines on executive reward (whoops, what bad timing); second; the editor's comment piece in the 24 September issue of PM (the day after the bonus story broke) entitled 'Double standards' and decrying the rotten state of boardroom pay.

"Surely it is no longer acceptable to have one set of rules for the rich and powerful, and another for everyone else," says interim editor Rob MacLachlan. I believe that's what you call delicious irony...

One final point on how this story was brought to light. Can it really be right that CIPD employees - or indeed employees at any organisation - find out about their leader's huge bonus payout through the press, and not via internal comms? That really is poor form - so much for being open and transparent with your own workforce.

The big freeze continues to dominate the headlines, with snow and ice causing havoc for employers and their staff across the UK.

Our story on the Personnel Today website gives a snapshot of how some HR directors in the worst affected areas coped with the extreme conditions. Once again it demonstrates the resourcefulness and quick-thinking of HR teams to keep organisations up and running and provide services for some of the most vulnerable in society.

From one freeze to another; the CIPD's call for a freeze in the national minimum wage for young workers. The institute argues that the recession has had a far greater impact on young people than other age groups - the unemployment figures bear this out - and it is important to avoid making this group of workers less attractive to employers.