Business View: The greedy bastards in the boardroom are fanning flames of discontent

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The Independent Online

We can all agree 2002 was a crappy year for business. Companies' profits, pros-pects and share prices plummeted. Many people lost their jobs and those who held on to them mostly tightened their belt and didn't push for too big a pay rise. Unless they happened to be a boss. Two surveys from Mercer Consulting this week show that the idea of restraint is not finding much favour in corporate boardrooms.

In the UK Mercer found that average remuneration for directors of UK companies went up 6 per cent in 2002 and in two fifths of companies, executives enjoyed pay rises of more than 15 per cent. To put this in context, 6 per cent is more than twice the rate of inflation (or four times if you use the Chancellor's new European measure) and more than 50 per cent more than average pay rises.

The gaps between what the boss gets and what the worker gets is widening, causing increasing bad feeling. But when you challenge companies on this, they answer "we must compete for talent in a world market", which means "look at how much they pay bosses in America".

Indeed. The greedy bastards in American boardrooms have yet again shown that their avarice cannot be sated. Already paid more than any other managers on the planet, and receiving over 200 times the average worker's salary, US chief executives enjoyed an average remuneration hike of 15 per cent in 2002. Now $3m a year is the benchmark for a US corporate boss, nearly double what the average pay package was a decade ago.

Senior executives on both sides of the Atlantic must come to their senses and realise the harm they are doing by demanding higher and higher pay. They have forgotten they are simply managers, hired hands employed to get the best return for their owners - the shareholders. Greed, especially in this context, is not good.

Bust-up at Barclays

Oh, to be a fly on the wall in the boardroom of Barclays when it meets this month to decide who should be the new chief executive. Having got the list of candidates down from five to two - finance director John Varley and Barclays Capital boss Bob Diamond - they are faced with an extremely difficult choice.

On track record, Mr Diamond wins hands down. (Who can forget Mr Varley's abject performance when Barclays tried to charge to use cash machines?) But American Bob is supposedly threatening to resign if he doesn't get the job. This plays into the typically British John's hands, as will the fact that Mr Diamond is paid double what he would get as chief executive, not to mention the strange issue of the Barclays Capital chief not being on the bank's main board.

And it gets worse. With institutional shareholders unhappy at the prospect of the existing chief, the affable Canadian Matt Barrett, stepping up to be chairman, he too is threatening to quit. Barclays could have a repeat of its boardroom shenanigans of five years ago, when it lost both chairman and chief executive in one go. Succession battles can be highly destructive. Remember Abbey National.

Carlton must be shown mercy

Yom Kippur, the Jewish Day of Atonement, starts tonight. While Michael Green is fasting for 25 hours and praying for forgiveness for his sins, the Carlton Communications chairman might be tempted to pray for mercy from the all-powerful Patricia Hewitt.

The Trade Secretary has in her gift a path to the promised land, by not setting such tough conditions on the Carlton/ Granada merger that the deal is dead. If she takes a tough line, she will consign Mr Green to years in the wilderness.

Though this deal is important for Granada, it is critical for Carlton. Tight on cash and with few other strings to its bow, it will be weak and vulnerable without a merger. While truly tough conditions, giving up both companies' advertising sales houses, would be a deal breaker for all involved, Mr Green may be ready to accept the compromise of getting rid of one sales house.

Allowing the merged company to keep both houses, and asking them not to exploit their market position, is no solution. Appealing to business people's better nature has rarely worked in the past.

Yet Ms Hewitt needs to create a national champion in commercial TV. So she has to be soft enough to get the deal done. She should go for the "dysfunctional" one sales house solution. Carlton and Granada might bleat. But they'll accept it.

j.nisse@independent.co.uk

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