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The Globe and Mail

Is Moya Greene the only CEO whose pay isn’t out of control?

Moya Greene, the Newfoundlander who looks after the post in Britain, is not getting a pay raise this year. The chief executive of Royal Mail Plc has, apparently, turned down an increase in her wages, a decision that may have something to do with the views of her largest shareholder, the British government, and a recent letter from business secretary Vince Cable, addressed to the bosses of Britain's biggest publically traded companies, urging pay restraint.

To be fair to Ms. Greene, who was paid £1.2-million ($2.2-million) last year, she is a notable laggard in the race to feed from the corporate trough – a point made loudly by her chairman, Donald Brydon, who reckons she deserves a bit more for steering the company through last year's controversial privatization. Moreover, she is paid half the amount of her predecessor, Adam Crozier. But the woman who previously ran Canada Post knows all about keeping government ministers at bay. Only last year, she had to pay back a housing allowance of £250,000 after Mr. Cable said he had not personally approved it.

You could almost feel sorry for Ms. Greene. She runs the world's oldest postal service, comprising 150,000 employees with bolshy unions, crabby politicians and irritated customers constantly on her back, all for a salary that would not get the average American CEO out of bed in the morning. To rub salt in the wound, Angela Ahrendts, another North American businesswoman who took over running a British company, is back in the U.S. easing herself into a big comfy chair at Apple Inc., running the retail business. On the same day that we learned that Ms. Greene was forgoing pudding, we heard tell of Ms. Ahrendt's stock option award. Valued at $68-million (U.S.) at current share prices, the woman who until last week was CEO of Burberry Group Plc, will get the great majority of the shares if she stays with Apple for four years, regardless of her performance.

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Different places, different customs, you might think, except that boardroom excess is high on the political agenda in America as much as it is in Europe. If sales at Amazon are any barometer of public opinion, consider that a book written by a French socialist, which calls for a global wealth tax, has been top of the bestseller list at the online bookstore for 50 days. The author of Capital in the 21st Century, Thomas Piketty, reckons that American CEO pay (and that of their boardroom colleagues) is a big part of the huge increase in inequality in the U.S. since the 1980s.

Defenders of the boardroom argue that CEOs take on risky jobs which deserve high rewards and, in any case, these days pay is always tied to performance. This is not always true; in the case of Ms. Ahrendts, the stock options seem to be merely about being there. But even in those companies where pay is complex and linked to all sorts of metrics relating to stock price performance, earnings performance and peer rankings, it begs the question of what the CEO's job is all about.

The business of running a very large company, whether it is about logistics, such as the Royal Mail, or consumer electronics, such as Apple, is about managing people and assets, getting the most out of what you have and avoiding big mistakes. It is not about betting the farm. The only justification of a big reward is where the individual has taken a large personal risk. But the CEOs and senior directors of very large companies do not take big personal risks. Contrary to popular belief, they are rarely sacked, except in highly unusual situations such as a catastrophic loss, a takeover or allegations of criminal behaviour. In nearly all cases except the latter, the CEO is amply compensated for early departure.

There is a simple solution to the problem of excessive pay. It is to stop pretending that CEOs are venturers, and to abolish the performance element. It is impossible to get compensation right; whatever targets are included will only focus the CEO's mind on a random statistic or a rival's behaviour rather than running his own business. Major companies, such as Apple or General Electric, have long ago ceased to be entrepreneurial, but are at best storehouses of skills – intellectual and financial resources that can be deployed well or badly. Stockholders don't want GE or Apple to take huge risks; they want steady incremental gain.

Those executives who don't like their pay and want big prizes can always leave and do the truly risky and rewarding thing: start up a new business.

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