Anthony Hilton: The skilled executives who justify their soaring salaries with a lack of unique talent

Few businessmen are as special as Pavarotti, so they don’t get any public recognition

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The Independent Online

Chief executives often justify the fact that their pay has risen twentyfold in the last 20 years by saying that there is global competition for top businessmen and they just get the market rate.

Sir Martin Sorrell, head of the advertising and marketing group WPP, summed it up neatly when he said: "We are a worldwide company; we are the leading company in our industry. The comparison, whether you like it or not, is with other companies in the world."

Well, on Tuesday evening a think-tank called the High Pay Centre blew that idea out of the water by looking to see what actually happened in the world, rather than what we assume happens. The author of the study, David Bolshover, examined 489 of the most recent appointments in the world's biggest companies and found that only 32 chief executives out of the 489 had been poached from another company.

Of these, only four had come from another country.

In the United States and Canada, out of 142 in the sample, not one big company chief executive was hired from overseas, and nor were they in Japan, Eastern Europe or Latin America.

Given the European Union enshrines free movement of labour, one would have perhaps expected more than just these four: Willie Walsh to British Airways and thence International Airlines Group in 2005, Marijn Dekkers to Bayer in 2010, Philippe Varin to Peugeot Citroen in 2009, and Bernard Fontana to Holcim in 2012. The prosaic reality, though, is that 72 per cent of the 153 companies studied appointed internal candidates.

Mr Bolshover says his study shows this is the norm everywhere – that the overwhelming majority of companies promote internally, and that international hiring is minimal. Although executives like to talk about talent, what they actually have is skill.

Talent is unique and special – as in Tiger Woods on the golf course, or Pavarotti in an opera house. Few businessmen are either unique or special, which is why so few of them get any public recognition. Executives have skill which comes from training and experience, but which can be learnt and applied by most intelligent people with the right personality. Executive skill is neither unique nor special.

Mr Bolshover makes a final observation that the international market for executive talent exists largely in the minds of self-serving chief executives and head-hunters seeking to justify their existence. Add in the fact that the internal candidate is likely to accept the top job anyway and there is absolutely no reason – other than that they can get away with it – for executive salaries to have risen so far, so fast.