Skip to main content

Management greed is Anti-Capitalist

A lot of anger is directed towards those in the corporate world who earn large salaries. Sometimes, in my view, that anger is not truly justified: for example, when an entrepreneur takes out income based on their ownership of a company, I -for one- tend to see it as just reward for those who take a risk with their capital.

However, listening to Martin Sorell on the Radio trying to justify his large remuneration, despite the objections of the shareholders in WPP was not an example of just reward. 

The fact is that Martin Sorell does not own the company he founded and built any more- his ownership is less than 1% of the shares- which still represents £800 million- after several sales, not least following his divorce from his first wife in 2005. he may have founded it, and built it but now he no longer owns it.

However, Sir Martin, is insisting on a substantial increase in his remuneration, to reflect, as he sees it the success of WPP over the past year. Yet, he does not seem to know the difference between being an employee and being an owner. The actual owners of the company- the shareholders- are being asked to forego their just reward in favour of a man they now employ.

This is a major part of the current economic crisis: those who invest risk capital may lose all they invest, while the managers of that risk capital, receive massive pay-offs, virtually regardless of performance. More to the point, even when shareholders vote against a management remuneration package, the remuneration committee may overrule the vote, since it is deemed to be merely "advisory". Now the shareholders of WPP will show their displeasure by voting against the re-election of the chairman of the WPP remuneration committee in large numbers.

If Marin Sorell wants to take a higher reward, he should buy out the shareholders, whose money he took when he sold the company.

To my mind it seems clear that these votes of the shareholders should not be merely advisory, they should be binding. The fact is that in large public companies, the management are employees who do not, in general, put up the risk capital to fund the business. Yet, they take rewards out at levels that imply not only ownership, but preferential ownership- they take out more than the shareholders.

This level of greed is undermining the very basis of capitalism: that those who take the risk should get the reward. It is our pension funds and our savings that are being compromised by the cozy cabal of management and irresponsible asset managers. It is absolutely time that asset managers who invest on our behalf were forced to take their fiduciary responsibilities more seriously, and time that managements had a much greater discipline imposed on them: by tightening the law if necessary. 


Popular posts from this blog

Concert and Blues

Tallinn is full tonight... Big concerts on at the Song field The Weeknd and Bonnie Tyler (!). The place is buzzing and some sixty thousand concert goers have booked every bed for thirty miles around Tallinn. It should be a busy high summer, but it isn´t. Tourism is down sharply overall. Only 70 cruise ships calling this season, versus over 300 before Ukraine. Since no one goes to St Pete, demand has fallen, and of course people think that Estonia is not safe. We are tired. The economy is still under big pressure, and the fall of tourism is a significant part of that. The credit rating for Estonia has been downgraded as the government struggles with spending. The summer has been a little gloomy, and soon the long and slow autumn will drift into the dark of the year. Yesterday I met with more refugees: the usual horrible stories, the usual tears. I try to make myself immune, but I can´t. These people are wounded in spirit, carrying their grief in a terrible cradling. I try to project hop

Media misdirection

In the small print of the UK budget we find that the Chancellor of the Exchequer (the British Finance Minister) has allocated a further 15 billion Pounds to the funding for the UK track and trace system. This means that the cost of the UK´s track and trace system is now 37 billion Pounds.  That is approximately €43 billion or US$51 billion, which is to say that it is amount of money greater than the national GDP of over 110 countries, or if you prefer, it is roughly the same number as the combined GDP of the 34 smallest economies of the planet.  As at December 2020, 70% of the contracts for the track and trace system were awarded by the Conservative government without a competitive tender being made . The program is overseen by Dido Harding , who is not only a Conservative Life Peer, but the wife of a Conservative MP, John Penrose, and a contemporary of David Cameron and Boris Johnson at Oxford. Many of these untendered contracts have been given to companies that seem to have no notewo

Bournemouth absence

Although I had hoped to get down to the Liberal Democrat conference in Bournemouth this year, simple pressure of work has now made that impossible. I must admit to great disappointment. The last conference before the General Election was always likely to show a few fireworks, and indeed the conference has attracted more headlines than any other over the past three years. Some of these headlines show a significant change of course in terms of economic policy. Scepticism about the size of government expenditure has given way to concern and now it is clear that reducing government expenditure will need to be the most urgent priority of the next government. So far it has been the Liberal Democrats that have made the running, and although the Conservatives are now belatedly recognising that cuts will be required they continue to fail to provide even the slightest detail as to what they think should guide their decisions in this area. This political cowardice means that we are expected to ch