“Earth to CEOs, Earth to CEOs – are you receiving me?” The newly launched High Pay Commission has scored a public relations hit with its poll showing people think FTSE 100 chief executives receive far less than they are actually paid. It touches a nerve, highlights the pay gap and seems to confirm CBI director-general Richard Lambert’s concern that ordinary folk think bosses have relocated to a different galaxy.
The HPC sets out to answer the question posed by its chair (and my former colleague) Deborah Hargreaves: “Are they worth it?” However independent and open-minded the commission is, the chances that it will respond with a resounding Yes must be slim. But this will be a wasted opportunity if it results simply in more shrieking about the system’s unfairness and in calls for, say, arbitrary pay caps. The results would be dismissed by the very capitalists on whom the HPC must depend if the pay issue is to be resolved.
Examples of self-sacrifice by executives are, unsurprisingly, rare. When they occur – as in the case of Gary Hoffman, the outgoing Northern Rock chief executive who agreed not to be paid during his gardening leave – they look grudging. The HPC should focus, instead, on why owners of companies – mutual funds, pension funds and the ordinary people who are their ultimate beneficiaries – do not impose more restraint on pay. That leads to the question whether the mechanisms for appointing executives and rewarding them for strong performance are working.
These aren’t easy questions to answer. The HPC starts with a very modest £100,000 budget and a tight deadline of a year to report back. If big bosses had any sense, they would contribute anonymously to this work: their own credibility depends on restoring intergalactic communication.
Yell’s shout in the dark
An agonised yell may be exactly what some investors in the publisher of the Yellow Pages feel like voicing right now.
Shares in Yell Group, which last year asked shareholders to stump up 42p a share in a £660m rights issue, now trade at about 12½p. Yesterday’s interim results did nothing to ease the pain, in spite of the company naming Michael Pocock as successor to long-standing chief executive John Condron, who is stepping down with finance director John Davis.
Mr Pocock and Tony Bates, the new FD, have a battle ahead. Yell’s traditional model – printing fat yellow books full of the phone numbers of local plumbers, restaurants and carpet cleaners – has fallen away as consumers’ fingers have done the walking – to Google and others.
Even as Yell has responded to the structural issue– upgrading its website with 3D maps and videos, buying TrustedPlaces to add customer reviews to its listings – the cyclical downturn has exacerbated its problems.
Yell is still profitable on a pre-tax basis and with shares trading at less than 2 times 2011 earnings, it offers a steep discount to the wider media sector. But the more salient figure is net debt, which analysts estimate could equal 5 times earnings before interest, tax, depreciation and amortisation next year. That’s a hefty burden for any company, but particularly hard to bear for one that is under cyclical and structural pressure.
Mr Pocock may already be studying his options for deleveraging. Disposals – of Yell’s Latin American and Spanish businesses, for example – would be one answer, although buyers of directories businesses are rare these days. Another rights issue would stretch shareholders’ patience. This time, Mr Pocock, who led Polaroid’s turnround and sale, cannot look forward to instant development.
The government’s promise to let a thousand Mandarin teachers bloom in England by 2015 is creditable. But the brutal truth is that language skills are withering in schools, with A-level entries for most modern languages falling.
Antonella Sorace, a professor of developmental linguistics, believes there is a case for much earlier immersion in languages, to the benefit of society and business. At an Edinburgh seminar on Wednesday, hosted by the RSA and the Bilingualism Matters project she leads, Prof Sorace will outline her finding that bilingual children’s brains are more flexible.
Being bilingual is “like having an extra gear that allows you to deal with certain types of complexity more efficiently”, she says. That’s the sort of asset businesses ought to foster. Research is under way to discover whether those who become proficient in a second language when older develop similar mental advantages. But a smattering of mandarin acquired at secondary level looks like far too little, far too late.
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