So when does CEO pay become too high? What are the commercial, ethical and cultural implications for organisations if they’re perceived to be over-paying their CEOs? And as businesses compete globally for the best executive talent what can Boards do to keep pay packages in check?
Host
Philippa Lamb
Guests
- Shefaly Yogendra, independent Board director, board adviser and author
- Peter van Veen, Governance and Ethics Director, ICAEW
Producer
Natalie Chisholm
Series Lead
Mark Rowland
Transcript
Philippa Lamb: Hello, welcome back. Last year, CEO pay rose 20 times faster than workers' pay. That's according to new research from Oxfam and the International Trade Union Confederation. At the most extreme end of that pay scale, we saw investors approve an executive package for Elon Musk worth a reported $1 trillion. So when does CEO pay become too high? What are the commercial, ethical, and cultural implications for organisations if they're perceived to be overpaying their CEOs? As businesses compete globally for the best executive talent, what can boards do to keep pay packages in check?
[Teaser audio] Shefaly Yogendra: There are several factors that come into play, and one of the things that we have started hearing more and more in the UK is the need for global competitiveness in being able to attract CEO-level talent.
[Teaser audio] Peter van Veen: And so it's really important that, not just the CEO's package, but the board's compensation are all aligned and focused on what you're delivering for your shareholders, which is long-term, sustainable, profitable growth.
PL: Shefaly Yogendra is with me. She's an experienced independent board director and board advisor with particular expertise in geopolitics and tech. Her new book, ‘Uncharted Spaces’, is all about the future role of boards. Also with us, podcast regular Peter van Veen, ICAEW's Director of Corporate Governance and Ethics. Welcome both.
SY: Thank you.
PvV: Thank you.
SY: Nice to be here.
PL: Shefaly, we've seen that disparity between CEO pay and the pay elsewhere in organisations. It's grown and grown in the past 20 years, hasn't it? That report points to a decline in pay for global workers in real terms, down 12%, I think, in the last five or six years. So how come CEO pay is still racing ahead?
SY: There are several factors that come into play, and one of the things that we have started hearing more and more in the UK is the need for global competitiveness in being able to attract CEO-level talent. In the UK, however, the way we report CEO pay is always reported as a ratio to the lowest paid workers in the business. So that makes the CEO pay look much worse sometimes. So for example, the ratios are at 122:1 at the moment, which is CIPD and High Pay Center numbers. In the US, however, the numbers are three times as much, and that is down to how the CEO pay packages are structured in terms of base pay, performance bonuses, and then stock options and stock grants. And the way the US market is going, the number obviously adds up to a very large number.
PL: Peter, Shefaly says, "I think the average CEO pay," it varies around the world. Clearly, US is way out in front of us. $8.4 million total compensation in 2025—£6.1 million. I mean, there are big global variations, as I say, but does this look like value to institutional shareholders, do you think?
PvV: So there's a couple of challenges here, aren't there? One is that we only see CEO pay typically going up. It's very rare for it to be adjusted downwards. That does happen if there is a significant crisis, and we have seen examples of CEOs forgoing bonuses or pay if the company is performing poorly. But those are exceptions. We also see CEOs or companies effectively benchmarking against others, and it is often in the interest of those doing the recruitment or the benchmarking for those to keep going up as well. So there is quite a lot of pressure for things to be going up faster than they do for the average employee. So what do institutional investors think about that? Well, institutional investors are quite exercised about that. They do vote down pay packages, exec pay packages. They recently voted down the BP one. These are typically advisory votes, so the companies are not necessarily bound by it. But it would take a brave chair if the majority of investors have said "no" to push it through anyway. So the investors are concerned about it. They don't think they're getting necessarily, value for money are perhaps the wrong words, but they don't often think that those percentage increases are justified according to the general market or often even the performance of the company.
PL: Well, Shefaly, you have direct experience of this yourself. How do boards arrive at a salary, say, for a new CEO? What's that conversation like?
SY: This is going to sound funny, but it sometimes is driven by where the CEO was sourced. So if you're a UK company and you went looking for somebody from the United States, you are hardly going to be in a position to offer that person less than what they are used to earning. A very good example of that is the LSE Group CEO, David Schwimmer, who was brought in from the US, and his pay package was quite different. AstraZeneca recently made the case that they can't continue to be competitive if they don't pay the same kind of level as in the United States. And lately, Unilever has started benchmarking their pay to other countries which are not the UK. So one of the factors, and as you mentioned earlier, Peter, is that there are lots of people who influence it, and nearly all of them are aligned from a conflict perspective. They're all aligned to pushing the CEO pay upwards. Then there is sector-specific benchmarking. There is benchmarking to the predecessor, although we do have one example of where the predecessor earned more than the successor which was Emma Walmsley, who earned less than her predecessor, and it was explained as her not having enough experience as CEO and therefore she needed to be paid less. We can be here all day discussing that.
PL: Gender pay. Yeah, absolutely.
SY: So there are several factors that go into the mix. But to Peter's point earlier, there is a huge amount of pressure coming from all the people who influence the package and whose incentives are tied to what the package eventually ends up being.
PL: Yeah. Peter, this thing of the US pulling pay packets hard, that's a big problem, isn't it? Because pay across the piece is far higher in the US than here?
PvV: It is, and of course it's a very convenient flag for any CEO in Europe and the UK to want to increase their pay to say, "Look at what my counterparts in the US are earning." I think we have to be realistic here that large companies do operate in a global market. However it's quite rare for Europeans to become CEOs of American companies and vice versa. That's not the norm. So I think again, I cannot go to my boss and say, "I'd like to earn a New York salary, please" because I would be doubling my salary if I managed to get that argument. That's not how the world works. CEO roles are not fluid. You don't take the CEO of, let's say, Fannie Mae in the US, and they don't just become the CEO of Unilever because Unilever is looking for a CEO. There are clearly cases where a company is going through a difficult time, it cannot find either a suitable candidate or it wants a change factor in the CEO to bring someone in who's got a track record of doing something that the board wants the CEO to do at their company. In those circumstances, I think there might be some justification for paying more to get a very specific type of candidate who might otherwise be unobtainable. But when you look at many of the multinationals or many of the large listed companies, often the people who are promoted to CEO are promoted to CEO from within the ranks of the company. They are not going to say no to the CEO role because they're not getting 20% more than the predecessor. This is a complete fallacy. So the argument somehow— and the capital markets group here in the UK, which is looking at how to make the UK a more attractive place to list— one of the key solutions that they keep advocating is, "We just need to increase the pay of UK CEOs, and we will have many more listings in the UK." None of the investors believe that's true. There is no evidence to back that up whatsoever.
PL: What do you think, Shefaly?
SY: I'd agree with Peter on that. I don't think that is an automatic creator of success or a promise of success. The reason for the opportunities to exit via the stock market being shrunk is manyfold. I have done an IPO, so I know from experience the reasons are manyfold. There is only so much capital to go around, and growth capital typically requires a different level of money to be raised, which our market may or may not be willing to do. Then when companies go from one stage of growth to another, they probably need a change of CEO, which is not something that founders like to hear.
PL: So some of these arguments are sounding a bit self-serving, aren't they? I'm wondering if we can talk about how some of the deals are structured as well. What targets are attached to these enormous numbers because it strikes me that if the targets are very aggressive, then you've got that embedded risk, haven't you, of driving risky behavior?
PvV: Well, absolutely, and I think this is where investors and other stakeholders really need to focus on what is it that, let's take Mr. Musk's pay package of the named $1 trillion. Now let's be clear here, he's not being paid a $1 trillion salary. He's being paid a package of options that if he hits some very aggressive targets, extremely aggressive targets, he could be earning up to $1 trillion worth in terms of options and various other vehicles. Now, what does that mean? It means that, of course, you are introducing a large degree of risk into the organisation because to meet those targets, that is not going to be achievable by making electric cars. Let's be very clear about that. Of course, also the challenge is coming to— to your earlier point, is that valuations in the US are much higher, and they're much higher because there's much more capital chasing shares. So Tesla is valued as a tech company. It's not valued as an automotive manufacturer. So investors are not necessarily looking for Mr. Musk to grow the car business at a steady rate and to innovate and produce more cars to get that one $1 trillion. They're looking for something else. What that else 'is', is a good question. There's a whole series of things that they're doing, but it introduces risk. So if you are thinking you're investing in Tesla as a traditional car company, clearly that's not what the investors are doing. So there is that element, but what does that do for the car company element? So I think investors need to ask themselves,’is there a very profitable business inside Tesla, which is the car company and the fuel cell business, the electricity storage business?’. These make good margins. I think it was over a $100 billion revenue last year, $20 billion profit, so a very profitable business. That does not justify the valuation, the market share valuation. It does not justify Elon Musk's pay package. So what is it that you're actually investing in, and what is it that you're approving when you're approving? So investors really need to unpick and say, "Why is that justified?". Now, the board's rationale for this, these kinds of hard, large increases— let's talk about that as well, was to say, "Well, that is the way to motivate Mr. Musk to do these exceptional things."
PL: And he is a unique case, I think we can say.
PvV: He is a unique case.
PL: This is charismatic leadership by definition.
PvV: But we've heard this before. We've heard it before that CEOs need to be paid a certain amount of money, otherwise they'll go away, or otherwise, they're not gonna hit the targets. And you're thinking, "Hold on a minute."
PL: He's not going anywhere.
PvV: They're not going anywhere. I mean, Mr. Musk owns 13% of the company. He is going to make a lot of money if Tesla does well, whether or not he has these incentive structures.
PL: Let me just take Shefaly's thoughts on this because obviously these points that Peter is making, they do apply to more, what I might call 'normal organisations' as well, this trickle-down, this blurring of the lines around what exactly are you being incentivised to do here. So how do boards avoid that? How do they disincentivise CEOs from doing things like that, that would be outright damaging, if not illegal, but damaging potentially to a sustainable organisation, which is what you'd hope for?
SY: As far as selling the idea of a company's valuation is concerned to the markets or to the investor base of any kind, there are only two pillars. There is governance and there's valuation. And the question is, if you can't trust the governance, can you trust the valuation? So that's kind of one point that I wanted to add to what Peter was saying earlier. But how do boards disincent-incentivise? They actually don't. There are no clawback provisions as far as I know in any CEO pay package, and no CEO will probably agree to signing that off because that'll also mean clawing back money from all the people who have influenced that number.
PL: It's an interesting idea, clawback, isn't it? Because it doesn't happen. Targets are met, additional money is paid. But it doesn't work the other way around that if you actually don't hit baseline expectations, you earn less. Why doesn't it happen?
SY: I think the best next thing that can be done is the creation of long-term incentives and then making sure that everything that is being done is not just in the service of quarterly improvements in profit, so quarterly improvements in revenue, but setting up the business for long-term success. Which, if you look at what the director's duties are, the board director's duties are about long-term success of the business. So then the board and the CEO who may remain in tenure much less time than the board might be, then they kind of align. CEOs do have shrinking tenures. That's another thing we know. There are no more serial CEOs who go one after the other doing one gig after another. So in a way, from a personal point of view, the CEO is essentially maximising what they can take off the table now. But from the board's point of view, they have to align the long-term success of the company with the incentive structures that are being created to pay the CEO, and long-term incentive plans are one of those tools. But no, there are no disincentives.
PL: Before we get any further into any of that, it's such a fascinating subject, should we talk about the dangers for the organisation of excessive CEO pay? I mean, how would you define this?
PvV: I think one has to be very clear about these things. You make a great point about short term versus long term. If you introduce aggressive short term or, as an example let's say, clawbacks could be seen as part of that. It's an all or nothing quarter type of package often or sometimes. If that's what happens, but the board is saying and the company is saying, "We are here, this is long-term sustainable profits for our investors and pension funds," well, I think very quickly after setting up the pay for the CEO to be aggressive on the short-term targets, you'll find that cascades all the way down the organisation. You'll find that the salespeople are incentivised to aggressively pursue quarterly results, and you'll find that all the management are also aggressively pursuing the targets because those are the CEO's targets. Within a relatively short space of time, if that wasn't the culture before, you will develop a culture where it is all about delivering the results, whatever it takes. Whether that is cutting corners, in terms of quality or customer service or cutting corners in terms of deals and perhaps paying a bribe here and a bribe there to hit the targets, you should not be surprised as a board that certain things start to happen, unintended consequences of setting aggressive short-term targets.
PL: Even if the outcomes aren't that overtly illegal, that perception gap, well, it's not a perception gap it's a reality gap between what the organisation says about its values and its mission and what it's actually doing, that filters down to every single person who works there, doesn't it? In terms of the way they engage with their employer?
SY: Definitely creates cynicism and lack of inner motivation in employees, especially if the disproportionality of the reward is very evident, which comes back to the ratios of the CEO pay to the lowest paid worker or the median pay of the lowest paid worker in the organisation. So that cynicism does start to percolate through. But I think there, we, at least in the UK, we do have to talk about how many businesses use contingent workers, zero-hour contracts. How do you calculate the lowest paid workers' pay?
PL: So the ratios aren't actually the ratios?
SY: The ratios aren't exactly the ratios.
PL: Because they strip out the lowest paid, the actual lowest paid workers.
PvV: And you can game it from that perspective as well.
SY: Yeah. So it has to be probed below the surface, from a definitional point of view.
PL: But this doesn't go unnoticed, does it? By intelligent people inside the organisation, it doesn't go unnoticed, and as you say, drives cynicism. It's gonna hit retention, it's gonna hit recruitment, all those things that are really undesirable, right?
SY: Yeah, and I would add one thing. If there's an organisation where people are vocally saying that they don't like it, you are still in a place where you can repair that culture. It is where people go silent and start leaving, that is the real challenge for the board and for the organisation itself.
PvV: I would just add to that— what I've seen in a number of organisations, including those I've worked in, where the incentivisation in terms of profit, short term or long term, stops at a certain level of the organisation. You find that below that, the employees get their salary and that's it. There might be some kind of end of year profit share calculated to something that no one quite works out how that works. But you end up not just with a disconnect in terms of culture, but you also end up with a disconnect between those that are aggressively pursuing their bonus and those that just have to deliver the work. They say, "Well, I don't understand why I'm having, at the end of each quarter, need to work 12-hour days to try and make someone else's target"-
PL: "Hit my bosses bonus", yeah.
PvV: "And I'm getting nothing out of that." Sooner or later they will just up sticks and go somewhere else because they will feel more valued or they will get a more equitable package in terms of the scheme of things. So that cynicism does translate into people moving on or a retention issue, or you end up retaining people who perhaps don't mind that or can't find work elsewhere. You end up with a potential issue in terms of the overall quality of your staff as well.
PL: It's disappointing, isn't it? After all this talk of inclusion in organisations, this is old fashioned 'them and us', isn't it? Bosses and staff, different rules?
PvV: Yeah and it can also impact, of course, your diversity in that kind of aggressive short-term target suits a certain type of individual who's quite happy to do that. It does not suit individuals who want to have healthy work-life balance or perhaps have young children to look after, or who need to work from home at a certain ratio. It starts to constrain your ability to attract talent more broadly, and you end up picking a narrower type of profile. Then of course, you run into the risk of not having a particularly diverse workforce.
PL: I guess this brings us to the boards themselves, doesn't it? Their own motivation for green-lighting ever higher CEO pay. I'm wondering about the dangers in the way that those members are themselves recruited and remunerated, and there's some bear traps there, right?
SY: Definitely. In the last couple of years or maybe a bit longer, you will notice fewer and fewer listed companies' board vacancies get publicly known. So the hiring itself is not completely transparent. Of course, listed companies have to report which external advisor they used, but do the external advisors actually cast a net wide enough to broaden the talent pool? That's one. The second part, I would say, is this particular clamor to make shareholders buy substantial shares in the company in a bid to align their personal wealth interest to the company's wellbeing and growth. I was asked this question once, and then I went looking for any research that actually tells us whether there is a particular threshold at which directors' independence gets compromised. How that threshold would be defined is, of course, a very difficult thing because some directors might be holding 1% of their wealth in the shares in a given company, and some might be holding 25% of their wealth. So the compromise itself is very hard to define and nail down. But as we know, for non-exec directors, their independence is their key pillar through which they operate. So there is a difficulty in resolving the forcing of directors to own shares without actually saying what do you want to do with it and how it influences director decision-making and their independence. So those are two things that come to mind, that there is not enough dissonance around the table or disagreement around the table. Of course, shareholders do talk to the Remco chairs. So the Remco chairs, who do a particularly difficult job in this environment, do go out and consult their largest institutional shareholders before they agree to any pay packages. Those conversations don't often see light of day because the Remco chair is shielding the rest of the board from a lot of the dissent and negotiating on behalf of the board and on behalf of the company with the investors. Not negotiating, but actually explaining to them what their thinking is and creating a buy-in before they can bring it back to the board and say, "Okay, this is our recommendation".
PvV: I think there's a couple of things we just need to pick up as well, and that one, the UK corporate governance codes and other codes are trying to disincentivise over-boarding so that you take on too many roles. However, what we're also now seeing is the exact opposite. So our members who are audit committee chairs often struggle to have more than one or two other roles outside of their audit committee chair role because the audit committee chair role has become almost a full-time job. That means you are dependent on one company for the majority of your income.
PL: So those roles become very significant.
PvV: So they become very significant. You don't want to lose them. So how independent are you? Now, I can assure you that our members through their code of practice and through their training, are supposed to be independent through our code of ethics as well. I have full faith that that is, for most of our members, exactly what occurs when they are chairs of audit committees because they've had a successful career, they're not reliant on the income. But when you see board members who are substantially younger and further down their career who do not have a diverse portfolio of board positions and you're thinking, how independent can you be? When being on that board is probably paying for your mortgage, probably paying your bills.
PL: This is a key point, isn't it? I mean, how hard are they gonna push back? It's perfectly understandable. Everyone has bills to pay, but it's a real problem that, isn't it?
SY: I think there are a couple of things that arise from it. One is that, once again, the comparison with the US comes up. Typically, US board directors are paid $250,000 or more. There are boards here, the vast majority of whom don't pay absolutely anything. To actually extract work from people without honoring the value of that work is itself a fundamental challenge. The second thing is that it's not just about being younger as board members and so on. It is also about, to our earlier point about inclusion, it is also about people who are known to be systemically underpaid, which would be a lot of women, it would be a lot of people of color, and then they continue to be underpaid. So the net wealth disparity essentially ends up being very large. It's not necessarily that people who have lots of money are independent because of the way they got hired on the board.
PvV: I think, just to close that circle, I think you need to have a healthy balance of positions, and they need to be adequately paid. I think you're absolutely right. The board positions in the UK are not paid to the level of responsibility and effort required. So FTSE board members get paid quite well, FTSE 100. Once you get beyond that, it's maybe £30,000/£50,000 pounds a year per position. Now, that is if you're a FTSE-listed company. If you do two or three of those, it might sound like a lot of money, but if you stay, if you're a CFO or if you're an audit partner, you're earning substantially more than joining a board. So there is that disconnect. Then as you move away from the FTSE or aim listed, it very quickly goes down. Housing associations, big complex organisations, NHS trusts, they might pay £5,000 a year.
PL: Obviously there's a kind of philanthropic element here in the nonprofit sector, people giving their time and their expertise, but you can really see the problem in this because as Shefaly says, it's a serious job. It takes time and thought to do it properly, and if you're not getting paid really, or if you're getting paid very lowly, you can see how it might be a bump for your CV, but how much time are you gonna spend on it?
PvV: Right, and there is a personal liability element because if it goes wrong, especially if you're a member of our institute, there is not just reputational damage, but potentially other types of liabilities as well. I think it means that it becomes harder to attract the right people onto your board because if there's any risk they might say, "No, thank you very much." And what you don't want to do is incentivise it in a way that you get the wrong type of people coming onto your board or their motivation is wrong. I promise not to pick on Tesla or Mr. Musk, but if we just look at how that board is compensated, they're compensated in share options. The chair, I don't have the stats in front of me, but I understand that they've taken home almost half a billion dollars worth of share options in the last four or five years. Now, that's good for them, but that's not allowed in the UK. You're not allowed to pay directors in share options for exactly the reason that it then compromises their independence because you're too tied into short-term results or when your options vest to think about other shareholders who perhaps have a different motivation. Let's say pension funds who will have a much longer horizon. So it's really important that not just the CEO's package, but the board's compensation are all aligned and focused on what you're delivering for your shareholders, which is long-term, sustainable, profitable growth.
PL: Thinking more about how to drive that, you mentioned term limits earlier on. Am I right in saying in the States they don't have those?
SY: They don't. They don't have term limits, and you will see people serving on boards for 25 or 30 years. But that said, the term limit thing here only ever applies formally to listed companies, and that too is on a comply or explain basis. There are currently very few chairs who are in that position, but I have known chairs who have been on their boards and chair positions for 25, 30 years and it went unchallenged. So the change at least is being driven in the UK and it has not been coerced. It is people realising how poor the optics are, how poorly the shareholders think you're behaving.
PL: That awareness is rising, is it?
SY: So that awareness is rising, but it is on a comply or explain basis and nine years is when you are deemed quite not independent. So you have to get out. Okay. Then usually in some cases, people will do a cooling off period before engaging with, let's say, an asset management house again.
PL: Is there a regulation piece we're missing here?
PvV: Well, I was just going to come to that. The answer is probably not in a sense that the regulator— there are some things that don't necessarily need regulating because the investors are actually doing that job. So institutional investors are the first to challenge a reappointment of a chair who's already been there for, let's say, a decade or eight, nine years or whatever the term limit has been set by the company. They'll challenge that, and they'll challenge the appointment of certain board directors and they will make that very public at AGMs, and they will be quite forceful in that. So the stewardship aspect of the institutional investors is doing its job very well there.
PL: At the top end.
PvV: At the top end, but they only do that for listed companies, because they're of course not doing that for unlisted because they are not stakeholders in that. Should government regulate in that area? Well, I think we have to be very careful here because there are lots of family businesses where the majority shareholder, the family appoint the chair, appoint board members, and I don't think it's for government to start interfering in how that's structured. On the other hand, if there are minority shareholders, minority shareholder rights need, do need to be protected, and they do need to have a voice on the board. So there is an element where government, yes, should make sure that shareholders, all shareholder voice are represented, but also other stakeholder voices are listened to. The UK Corporate Governance Code used to have a more explicit clause on boards ensuring they have some kind of employee voice on the board. If not a voice on the board, then certainly have some kind of link to the employees. So they're having conversations so they can understand issues and what's happening on the ground.
PL: But that's gone away?
PvV: Well, it's been weakened in the latest corporate governance code in terms of the language. I think the intent is still very much there. So it is really for companies not necessarily to appoint an employee representative on the board, I think that's a choice, but really for the board members themselves to have some kind of mechanism to have, to be able to hear concerns of staff and hear staff issues which, unfiltered through the executive management.
PL: We're tight for time here, Shefaly, but what would you like to see?
SY: I think one of the key differences between, since you've mentioned the US, is that they have a very rule-based kind of system, and we have more guidance based, which allows the boards to exercise their judgment in a lot of things. The minute you codify it, people start using it as a checklist which is what has happened in the whole diversity malarkey, that people have started using protected characteristics as a checklist. That is not how you find people who are different. So I think that factor needs to be highlighted quite clearly. The other thing is that the board explicitly doesn't have to pay attention only to the biggest or the loudest shareholder who has access to them. The job of the board is to represent all shareholders, and that falls on the board to make shareholder contact, to actually understand from them what their considerations are. The flip side of it is that when things are going well, shareholders actually don't want to talk to you. If they want to talk to you, you're already doing something wrong. So that needs to be taken into account. But a board that makes active outreach to all its shareholders to understand their considerations and concerns would probably not fall foul of having a know, satisfaction level which they can talk about.
PL: Where do you both see the direction of travel here? It's hard to see an end to CEO pay inflation, isn't it?
PvV: I think as we explained before, the pressure from benchmarking and CEOs wanting more pay is not going to go away. It is a challenge. It is a challenge across all industries now, where the public benchmarking or the public numbers being thrown about makes it feel like that's just what happens. So it's becoming normalised because what does tend to happen, you get a bit of a blow-up the investors might vote against, and then it goes away and dies down, and the CEO still gets that pay. Then the next time it comes up, and that might not be for another few years, it again blows up a bit. It is somewhat disappointing because that connect between shareholders and exec pay is there, but institutional shareholders are very limited in their ability to tackle systemically the entire market. They can only address individual companies at individual AGMs. As I mentioned before, most of those votes are non-binding. So unless you get a significant number of investors voting down those proposals, then it tends to pass without muster. So there's a lot of pressure on investors to try and tackle something which actually is a broader societal issue.
PL: Are they up for that challenge, do you think, Shefaly?
SY: I think it's difficult to say because we are navigating difficult situations, difficult circumstances, and partly as a provocation, I would say that there's a conversation that says, "Well, the next $1 trillion company will have five employees." If that happens, what is the role of the board? How many people are in the organisation? How many shareholders will it take if it is every, if everything is supposed to be about a technology enabled, highly efficient, super productive, serving everybody? I don't know who's buying their stuff though. So that would be a whole different problem, and I do think that is a question that boards probably want to start thinking about, that if you're gonna cut your workforce dramatically using AI as a fig leaf, what other conversations will arise from it? The CEO pay in that situation doesn't seem like it's gonna be the first thing on the agenda to be chopped, because then the CEO would be able to claim that they delivered a more efficient, more productive, more profitable organisation. Over what timeframe it will happen, probably remains to be seen.
PvV: I'm gonna give a slightly different take on this. I think ultimately, if you're in a partnership or it's your own company, how you pay yourself and how that splits up is frankly your business. I mean, that is the way it is. CEOs are employees. They are not owners of the company, with an exception of Mr. Musk who is an owner of the company. But most CEOs are employees, and their pay should be set through a sensible construct which is explainable to the outside world, is part of a standard pay and reward system which is sensible for the company and for achieving the goals long-term for institutional investors. So that's the issue at hand here. If you have a $1 trillion company with five employees and they are the majority shareholders, they will take a lot of money out of that company, whether it's a salary or through options or through shares. I think that is less critical. Absolutely get the point that the implications of those types of companies might be moved beyond, or far beyond the CEO pay package. But I think for the CEOs of, let's say, listed companies in the UK, they are almost all of them just employees, and therefore, they should be treated just as employees. I'll come back to my analogy. If I went to my boss and asked to be benchmarked against New York or Singapore salaries or Silicon Valley salaries, he'd tell me, "Well, if you wanna earn that kind of money, off you go. Book a plane ticket and off you go then." I don't think we say that enough to CEOs in this country who threaten to up sticks and move across the pond.
PL: I think we're gonna have to leave it there. So much more I'd like to discuss with you both, but really fascinating. Thank you.
PvV: Thank you.
SY: Thank you very much.
PL: You'll find links in the show notes to the various reports and information sources we've mentioned. If you're an ICAEW member, remember to click through from those show notes to the ICAEW site. That way, you can log your listen to this podcast as CPD before it slips your mind. If you have any thoughts you'd like to share about today's episode or indeed the podcast in general, we would genuinely like to hear them, and you can get in touch with us now via contact email. Here it is, podcasts@icaew.com. Thanks for being with us.