In his new book, published Jan 2011, Manchester Business School Professor Chris Bones discusses why the only people who can curb excessive pay are those benefiting from it - the L'Oréal generation, who think they're worth it...
Trust and confidence in leaders in all walks of life has plummeted. Even worse, it has also plunged in the systems and structures over which they preside. Underlying this sentiment is a feeling among the general public that those at the top of society seem to have walked off with the lion's share of the benefit.
And they are right to think this. Over the decade from 1998 to 2008 the wealthiest 10 per cent of the population of the UK saw their real household incomes rise by nearly 40 per cent while the poorest 10 per cent noticed a decline in theirs of about two per cent.
Yet despite the criticism, the old way of doing things is already rearing its head again, in banking, politics, business and the public services. It doesn't seem like our leaders have learnt much from what has happened. This is because many of those in leadership positions in business have a blind faith in their own perfection built on a combination of a belief in their own talent (in other words, "I'm here so I must be talented"), and compensation that reinforces their "super-human" status.
But I have a different view: no one can become the perfect leader because no such thing exists. Indeed, I suggest that the cult that now surrounds leadership and leader development is positively dangerous, not just for business but also for society as a whole. The so-called war for talent has fuelled the rise of a phenomenon of the late 20th century: the narcissistic organisation. This is one that is led and peopled by individuals who are strengthened in their self-belief every day by systems of reward and promotion that confirm their abilities. These leaders are not just infallible, but they are paid at levels that underline their superiority over the rest of us mere mortals. This is the L'Oréal generation: they're worth it.
There is a plethora of statistics to show the unequal rate of growth of chief executive and leadership rewards against that of the average wage-earner: all of them show the huge disparity in large corporations. When you witness the highlighting of personal worth within a corporation that displays all the signs of being narcissistic you have the ingredients for a tragedy. The hubris of Enron has been exposed by the global financial crisis as a far more common affliction in modern business than its leaders would like us to believe.
The demonisation of bankers in particular and business leaders in general does society no good, but it will not cease until they accept that their pay needs to be fair relative to others within the organisation they lead.
Overall, we have to be prepared to set a standard that well-managed businesses will follow. And there must be a mechanism to restore the relative rewards for senior executives against all other employees to a level that has broad social acceptance. This is not a challenge to politicians to intervene; rather it's an ultimatum to business leaders themselves to change. After all, the only people who can curb the excess for good are those who benefit from it. That would be the real test of leadership.
This article was first published in Director Magazine.
You can buy Chris Bones' The Cult of the Leader on Amazon: http://amzn.to/eNQllE