[Comment] Killing the golden geese
RUDI PLETTINX
05.09.2008 @ 10:10 CET
European Union finance ministers will no doubt have spent idle moments during their summer holidays dreaming up new ways of clamping down on the "scandalous excesses of captains of industry" denounced at the Ecofin council before the recess in a passionate speech by Luxembourg Prime Minister Jean-Claude Juncker.
We are killing the golden goose if we decide to cap corporate salaries (Photo: European Community)
EU governments at the time promised to tell the European Commission exactly how they intend to deal with this "social scourge".
Juncker would like to increase taxes on high pay-offs. Nicolas Sarkozy has suggested setting EU-wide limits on the amount anyone can earn. The UK government has asked CEOs – and their junior staff - to reign in salary ambitions. But the UK has also in the past expressed fears over the knock-on business effects of curtailing executive bonuses.
I believe the UK was right to be afraid. The main effect of such a witch-hunt, if it really happens, would be to drive the best and brightest business leaders out of Europe - or into private equity firms where their earnings are not a matter for the prying eyes of the tax authorities.
The general assumption is that Europe's CEOs are all paid huge amounts. In reality they earn on average about a quarter as much as their US and Asian counterparts do - for now.
Why should only Europe's job-creating business leaders be punished for being successful? Josef Ackermann of Deutsche Bank may have earned an annual salary of $12.4 million. But the Rolling Stones pocket €4m for an 80-minute gig. Should we be confiscating most of that too? What of star football players, earning so much that most top teams are mired in debt? What about Paris Hilton?
I agree that it can be hard to see the discrepancy between the millions earned by senior executives and their staff as anything other than cruel. Shop-floor workers at UK retailers Marks & Spencer's, typically earning around £7 (€9), will have felt no sympathy when their chief executive, Stuart Rose, saw his annual bonus fall to £1.38m (€1.75m) this year.
But it is disingenuous to think that taking from the rich will in this case change anything for the poor. There is no evidence to show that in countries such as Norway, where the CEO-to-shop-floor pay divide is typically smaller, people are happier, healthier, or live longer than their peers in the US or Germany.
Yes, Europe has problems. Changing demographics, for instance, have made us all more worried than ever about earning enough to be secure and comfortable throughout our lives. But hounding wealthy CEOs is nothing more than an idle distraction from today's real economic problems.
With an increasing number of MEPs being investigated for sleaze, getting steamed up about a tiny, tiny percentage of top managers becoming rich because they were smart enough to sign a - legal - employment contract just looks like jealousy.
Europe needs its big public companies. It needs their ideas, their tax revenues, and the jobs they create.
Great leaders set the pace and the style that others follow.
The author is vice-president of the Center for Creative Leadership. CCL works with a number of multinational corporations and organisations around the world, including 82 of the Fortune 100.
