Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
    • OHW Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+

Personnel Today

Register
Log in
Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
    • OHW Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+

Personnel Today

Pay for performance is the only way forward

by Personnel Today 8 Jul 2003
by Personnel Today 8 Jul 2003

A
summer of shareholder revolt has made life distinctly uncomfortable for
so-called fat cats. Strengthened by government regulatory changes that have opened
up access to information on executive remuneration and provided new rights to
vote on reward packages, shareholders have been keen to hold company boards to
account to ensure executive pay reflects performance.  A particular source of unrest has been big payoffs to executives
departing failing companies, so much so that the DTI has launched a consultation
on whether and how corporate governance might be further strengthened to tackle
‘reward for failure’.

It
would be wrong, however, to presume shareholders are the only corporate
stakeholders expressing concern on this matter. Not only are the trade unions
up in arms – as might be expected – but so too are HR professionals. Last
year’s personnel rewards survey, published jointly by the CIPD and the Reward
Group, points to considerable discontent within HR over perceived unfairness in
the setting of executive pay. Unease stems both from the large gap in reward
between the top cadre and other ranks within organisations, and the fact
executive pay has been accelerating away from the pack. In 2002, for example,
executive pay rose three times faster than average earnings.

More
than a quarter of HR and training professionals feel their director or chief
executive is overpaid, while one in 10 reckon their employers do not care about
the fairness of pay decisions. These negative perceptions may be associated with
the findings of CIPD reward management surveys which say that communication of
reward programmes is often minimal, does not encourage transparency, and
largely excludes employee involvement in changes to the design of reward
practices. But of particular significance is the fact that a majority of HR
professionals believe that unfairness in executive pay setting has a negative
effect on recruitment (59 per cent), retention (73 per cent) and employee
commitment (78 per cent).

The
HR perspective on executive pay thus suggests that ensuring a clear link
between executive pay and performance would itself help boost performance, and
implies the need for a closer association between the way organisations
approach executive reward and reward strategy as applied to the rest of the
workforce. Even the best remuneration committees are typically fixated on the
external market – stressing the need to match executive reward packages in
comparable companies – often with little regard to reward structures inside an
organisation. Yet it is precisely this disjunction between the setting of top
pay within an organisation and that of its rank and file that underlies the
concerns about fairness and performance expressed by HR professionals. The
message from HR is therefore clear: organisations that want to avoid fat cat
controversy must consider both the ‘ins and outs’ when it comes to executive
pay.

By
John Philpott, Chief economist, Chartered Institute of Personnel and
Development

Avatar
Personnel Today

previous post
Working Time Directive to cover 770,000 more staff
next post
Age laws could lead to cuts in redundancy pay

You may also like

Five steps for organisations across the globe to...

8 Jun 2022

The Search for Talent: Six Major Employer Pitfalls

24 May 2022

Grants scheme set up to support women’s health...

16 May 2022

How music can help to ease anxiety at...

9 May 2022

OH will be key to navigating ‘second pandemic’...

14 Apr 2022

OH urged to be aware of abortion consultations...

8 Apr 2022

How coached eCBT is returning the workplace to...

8 Apr 2022

Why now is the time to plug the...

7 Apr 2022

Two-thirds of shift workers feel health affected by...

18 Mar 2022

TUC warns of April Covid risk assessment ‘confusion’

14 Mar 2022
  • NSPCC revamps its learning strategy with child wellbeing at its heart PROMOTED | The NSPCC’s mission is to prevent abuse and neglect...Read more
  • Diversity versus inclusion: Why the difference matters PROMOTED | It’s possible for an environment to be diverse, but not inclusive...Read more
  • Five steps for organisations across the globe to become more skills-driven PROMOTED | The shift in the world of work has been felt across the globe...Read more
  • The future of workforce development PROMOTED | Northumbria University and partners share insight...Read more
  • Strathclyde Business School expands its Degree Apprenticeship offer in England PROMOTED | The University of Strathclyde is expanding its programmes...Read more
  • The Search for Talent: Six Major Employer Pitfalls PROMOTED | The Great Resignation continues unabated...Read more
  • Navigating the widening “Skills Confidence Gap” in 2022, and beyond PROMOTED | Cornerstone OnDemand conducted a global study...Read more
  • Apprenticeships are the solution to your recruitment problems PROMOTED | Apprenticeships have the pulling power...Read more

Personnel Today Jobs
 

Search Jobs

PERSONNEL TODAY

About us
Contact us
Browse all HR topics
Email newsletters
Content feeds
Cookies policy
Privacy policy
Terms and conditions

JOBS

Personnel Today Jobs
Post a job
Why advertise with us?

EVENTS & PRODUCTS

The Personnel Today Awards
The RAD Awards
Employee Benefits
Forum for Expatriate Management
OHW+
Whatmedia

ADVERTISING & PR

Advertising opportunities
Features list 2022

  • Facebook
  • Twitter
  • Instagram
  • Linkedin


© 2011 - 2022 DVV Media International Ltd

Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
    • OHW Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+