Margareta Pagano: Wolfson's gesture marks dawn of a new era
The Next boss's bonus give-away is one of several efforts by businesses, reacting to public and shareholder pressure, to change their culture
Margareta Pagano is a former business editor of the Independent on Sunday who now writes columns and business interviews for a range of publications, including the Independent, Independent on Sunday and London Evening Standard.
Sunday 21 April 2013
Bravo to Lord Wolfson of Aspley Guise, the chief executive of Next, the fantastically successful clothing retailer that has seen its shares almost double over the past three years.
Simon Wolfson's decision to give away £2.4m of his bonus to be shared between 19,000 of the retailer's staff was a generous one and should be applauded. Predictably, though, Wolfson's gift to fellow staff – some £200 per employee on average – has gone down like a lead balloon with many and been dismissed by unions such as the GMB as a PR stunt and self-serving.
They have missed the point entirely; whether Wolfson's gesture was self-serving or not is irrelevant; of course it's easy to make such great gifts when you are already wealthy but a good deed is a good deed.
Far more interesting is that by making this symbolic gesture, it seems to me that Wolfson has acted in a deliciously subversive manner which undermines those of his fellow industrialists who have been using their companies as personal gold mines.
Whether Wolfson intended to or not, his action suggests he believes there's a limit to man's riches and that, at a certain point "enough is enough". That's certainly what he seemed to say in the email sent to staff last week explaining why he is donating half his bonus to them: "The exceptional gain in our share price has meant that this [share award] has now become more valuable than I could possibly have expected. As I am a shareholder, I have also greatly benefited from the increase in our share price."
Nor is Wolfson the only one upsetting the status quo – Nat Rothschild had another go at the Bumi board last week with his demands that the fees to all directors be cut more in line with the average paid to those in comparable FTSE 250 companies. Rothschild, who owns a fifth of Bumi's shares, also warns the board that executives should not be paid any cash bonuses given they have overseen such a massive destruction in shareholder value and other targets. There was a similar new mood being shown at BHP, where the new chief executive, Andrew Mackenzie, has said he will take a big pay cut and sacked many of the top earners from the previous regime.
But the greatest culture shock of all came with the mass clear-out last week of Bob Diamond's former lieutenants at Barclays with the departure of Rich Ricci, the fabulously rich head of the investment bank, and Tom Kalaris, boss of the wealth management arm. Since joining Barclays, Ricci is said to have amassed a £100m fortune from the bank plus the sales of shares last month for another £18m. It's the biggest shake-up at Barclays since Antony Jenkins took over as chief executive and does suggest that he is determined to change the bank's culture following the Libor scandal among others.
So it's better late than never that the Church of England has attacked the culture of greed among some of the UK's top bosses and finally overhauled its view on pay and bonuses for the companies – like Barclays – in which it invests. From now on, the CoE's investment board says its £8bn of assets will be used to vote down excessive payouts and to take other measures into account as well as ethical and social. More precisely, it will attempt to vote down any bonus worth more than an executive's basic salary; now that is tough.
The Church also wants to act as a model for other disgruntled investors and to take a more active role. Companies such as RBS, Tesco and BP in which it invests had better watch out. They make an unlikely bunch of fellow-travellers – Wolfson, Rothschild, the Church of England, Barclays and BHP. But they are ahead of the curve and on the right side of the pulpit.
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