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Genuine gestures or PR stunt?

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Posted by Justine Woolf on 03 April 2020

Genuine gestures or PR stunt?

Executive Compensation | Remcom | Reward Consultancy | Long Term Incentives | Pay Fairness | Exec pay | LTIP | Business Ethics | Covid-19

Why executives and footballers should take a salary cut 

Our Pay Trends event in January feels like a lifetime ago now, and whilst our predictions with regards to pay increases and economic trends may now be worthless, our overarching theme around Responsible Reward and doing the right thing is as relevant as ever.  

Having watched reports over the last few days of Executives taking pay cuts you would think that the penny has finally dropped in the recognition that as businesses struggle to manage their cash flows and liquidity, some self-sacrifice, particularly when the pay package is rather excessive in the first place, would be an early consideration. 

However, whilst company bosses talk the talk of wanting to save jobs in the long term by putting their staff on furlough, you might expect that they themselves would take a fair share of the hit. 

 This does seem to be playing out in some businesses – in the case of Santander, the CEO & Chairman are donating 50% of their entire package to charities supporting relief efforts against the virus. Marriott Hotels, CEO Arne Sorenson will relinquish his salary for 2020 and his executive team will take a 50% pay cut. Likewise Taylor Wimpy Executive Directors are taking a 30% cut in salary and pension during the duration of the lockdown and Disney Executive Chairman Bob Iger has said he will forgo his salary for the remainder of this year.  

However, whilst these gestures particularly around base pay or reductions cuts are on the face of it genuine, what isn’t quite as evident is that the base salary for most Execs in large business not only runs into the millions (and hence they might be able to get by for a few months!), but it also is often the smaller part of what is a much larger total cash package.  

Iger for example earns $3m in base salary, but his total package last year was in excess of $47m. That’s not to say their total packages, often made up of variable pay plans and share options, won’t have suffered and will most likely not pay out in a number of cases, but the headlines can often make what looks like a genuine gesture of solidarity sound more profound than perhaps they might be in reality.  

There’s a similar debate going on in the football world right now, particularly when clubs who turnover millions of pounds annually and pay their first team players an average weekly wage of £70,000 a week, are putting non playing staff on furlough but as yet, very few are actioning any pay cuts or deferrals of players pay. 

They are being accused of living in a moral vacuum as they continue to be paid whilst other backroom and support staff are placed on the government job retention scheme that is capped at 80% of their earnings (up to £2,500 per month). No doubt there will be an agreement reached as elsewhere in Europe players are taking pay cuts or having pay deferred. But the pace of progress says a lot to some about a true lack of authenticity.  

Doing the right thing can be hard but we all know instinctively what we should do as leaders to set an example. I am a trustee of a charity and this week members of our SLT voluntarily put themselves forward for furlough as they could see that the efforts and focus needed to help sustain the charity through this crisis were not in their departments. A very noble gesture that has been hugely appreciated by all staff and absolutely lives up to our values of being stronger together. 

We need to make sure that leaders and those who can make a difference to the survival of their organisation do more than just talking the talk about supporting their teams through this crisis – truly authentic leaders walk the walk too. I hope we see more of this as the following days unfold… 

Innecto can help with executive pay arrangements or any aspect of pay and reward. Please email justine.woolf@innecto.com if you'd like some help. 

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