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What’s the problem with CEO pay? – Australian Financial Review 4th Oct 2018

What’s the problem with CEO pay? – Australian Financial Review 4th Oct 2018

What’s the problem with CEO pay?

Labor’s move to compare CEO-staff pay ratios will provide a spotlight on excessive CEO remuneration, but little else in terms of usefulness. Investors are more interested in the productivity of key people working in the business and using this as a yardstick for remuneration.

Far better to publish individual scorecards making visible to an investor the contribution of the individual. Easily done by calculating a percentage score of actual performance to an agreed target. And only metrics where the individual has a direct line of sight. A CEO should be responsible for performance to target for enterprise value. A sales manager, repeat sales and new business. A production manager, cycle time and error rates, etc.

If a CEO is meeting targets on EV, then what is the problem? Similarly, if a production manager is producing the goods on time and defect free, then reward him appropriately. If a sales manager is consistently growing revenues, again publish this and reward her.

Accountability along these lines will produce far superior business outcomes (for everyone at all levels) than will Labor’s veiled attempt to shame.

Article written by Jeremy de Constantin
Jeremy is a business turnaround and growth coach to CEOs and executive teams. His point of difference is his hands-on experience leading mid-large private companies. His success rate in getting a business “unstuck” is down to one simple rule – Fixing the things that most need fixing.

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