From the soon to be demerged Cordiant advertising group comes another of those executive equity participation plans that will enrich senior employees beyond the dreams of avarice provided certain performance targets are met. These admittedly look quite challenging given that to hit the jackpot, the company has to achieve compound growth in earnings over three years of 25 per cent. Few stock market analysts give either of the demerged halves, Saatchi & Saatchi and Ted Bates in the US, much chance of hitting them, but then they said the same thing about Martin Sorrell at WPP and he's now laughing all the way to the bank.
Actually, the task may not be that hard at Saatchi & Saatchi either. Executives don't have to add any new business at all to gain top dollar; all they have to do is to is improve their profit margin, which at present is about half that of the top performers in the industry. In other words, just running the business for cash might deliver the required result. For lower levels of performance the consolation prizes ain't half bad while abject failure results in only limited damage to the pocket.
The problem with all these schemes, which seem to be spawning the length and breadth of corporate Britain, is not so much that the rewards of success seem so excessive but that the penalty for failure are so limited. However, they perform, all these people will continue to draw base salaries in line with the best in the industry. They are neither risking their own capital, nor is the wealth they are creating the result of their own entrepreneurial endeavour. But then you just can't get the staff these days, can you dear?
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