Outrage over executive pay is overegged

Following the High Pay Centre and CIPD's annual report on executive pay Sam Dumitriu, Head of Research at the Adam Smith Institute, finds little reason for outrage in the figures:

“It is a mistake to fret about executive pay packets. In fact, given how important the decisions a CEO makes are to the success of a firm, it would be shocking if they were not extremely well paid. When Burberry’s CEO Angela Ahrendts announced her departure, it wiped £536m off Burberry’s value. Similarly, when Steve Ballmer resigned as Microsoft CEO, the firm’s value jumped by £20bn. Is it any wonder that firms invest heavily in attracting top talent?

“The long-term trend suggests that CEOs are more valuable to firms now than ever before. Unexpected CEO departures are leading to ever bigger share price movements. If shareholders, and that includes anyone with a private pension, want a return on their investments then hiring the right chief executive is essential.

“The High Pay Centre are wrong to link high pay at the top with low pay at the bottom. Poorly performing CEOs are bad for shareholders but worse for workers. Microsoft’s failure to invest big in smartphones not only reduced profits, it also meant they created fewer jobs. Politicians should be careful, bashing CEO pay may sound good on the stump but if British businesses lose out on top talent to the US and Europe, British workers and savers will pay the price.”

If you would like to arrange further comment or an interview please do get in contact with Matt Kilcoyne via email (matt@adamsmith.org) or phone (mobile: 07584778207, office: 02072224995).