Letter: Determining a just reward for executives

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The Independent Online
Sir: Your leading article 'Golden rewards for boardroom failures' (12 May) rightly castigates the rise of directors' salaries regardless of performance. Your suggestion, however, that a measure of performance should be 'how well a company's share does against those of similar organisations' could well encourage the worst aspects of short-term management.

Over a period of time - which could be years, depending on the nature of the business - relative share price may well indicate the true underlying worth of a business and its future prospects. Short-term profitability, and thus short-term share price, can always be enhanced by the reduction of training or research and development - elements that are vital to the long-term competitiveness and success of a company.

In the short run, the share market tends to be an inefficient measure of anything other than the immediate financial value to the shareholder. If additional criteria were available to it, for example, a quantification of the value of employees and their training as a resource (rather than regarding them simply as a cost), then the market could act more effectively for the good of industry. Indeed, thoughtful business leaders are now grappling with the problem of how the obligation to stakeholders other than shareholders might be measured, recognising the general truth that what business doesn't count it doesn't care for.

You rightly criticise the mechanisms by which such pay rises are given. But it is, of course, the recipients who accept them; and at the end of the day there will be no substitute for leadership and example, essential components of good management, which should temper pay rises of the kind that have understandably provoked criticism. Since the media, in particular the press, view individual business prowess in terms of what is paid rather than what is done, it will be the brave man or woman who is prepared to see a salary significantly below their rivals. But then moral courage, too,

is an essential requisite of good management.

Yours faithfully,


London, SE10

13 May