Size doesn't matter

I mentioned in my previous blog (here) that top industry bosses, especially water, are lambasted for their huge salaries, whereas footballers, actors and so-called singers aren’t. I called it “inconsistent moral grandstanding”. 

Coincidentally, the CEO of Thames Water, Sarah Bentley, was interviewed on the Today programme earlier this week, and whichever left-leaning, doesn’t-understand-the-meaning-of-the-word-impartial presenter it was gave her a hard time about her £2m p.a. remuneration package. To be honest, it was a fair line of questioning. However, later in the programme he interviewed a 'mermaid', which I assume is the latest twist in this gender-ID nonsense. The two of them bitched about the CEO’s salary like two prepubescent schoolkids complaining about a prefect behind her back. A good professional journalist / radio presenter would have remained neutral or, preferably, got her to divulge what she thought the CEO should be paid and whether she believed that anyone would or could do that job on the ‘more acceptable’ salary. But this is the BBC. They have their own agendas. They take sides. They’re neither impartial, balanced nor professional. Now that Fishy Rishi’s got a deal on Northern Ireland, he should turn his attention to scrapping the BBC licence fee.

What do I think is a fair salary for the Thames Water CEO? I could hear that question coming from downstream of the local sewage works.

Before answering, I thought I’d doublecheck the offending £2m by examining Thames’ Annual Report and Sustainability Report for the year ending 31 March 2022. From this I found that Bentley’s remuneration included:

Annual salary – £750,000
Taxable benefits (e.g. travel, medical) – £32,000
Annual pension – £90,000
Annual bonus – £496,000
Buy-out payment – £680,000
TOTAL: £2,048,000

The bonus was 55.1% of the maximum possible. It’s linked to company, not personal, performance and focuses on safe people, customer service, customer and environmental delivery, strategic change programmes and financial delivery. In other words, she might have been paid more had Thames spilled less sewage.

The buy-out payment relates to unvested awards that were forfeited as a result of her leaving her previous employer, Severn Trent. 

To put this into one context, the median UK salary for a full-time employee in the Southeast is about £35,000. An unmarried person would pay just over £7,000 in income tax and National Insurance. Assuming a 40-hour week and five weeks’ paid holiday p.a., this equates to about £15 per worked-hour take-home-pay. A package of £2.048m would attract tax and NI of about £950,000. CEOs generally (at least I hope they do!) work much longer than a 40-hour week and are often on call throughout their ‘days off’ and holidays. For the sake of argument, I’m assuming a 12-hour day for six-days-a-week for 50 weeks of the year, which would make the take-home pay £317 per worked hour.

Look at that paragraph again: an average full-time worker pays £7,000 in taxes; a well-paid executive pays £950,000. How many nurses does that pay for? How many teaching assistants? How many police officers? How many students at Uni studying Woke-onomics from their safe spaces?

What has attracted as much ire as the size of Bentley’s pay is the principle that she should be paid a bonus for shovelling sh-t into our rivers and streams. As noted above, she ‘only’ received 55% of what she might have done had she not been so liberal with the shovel. (Where I come from we call a spade a spade, but I don’t want to use that word and send the Woke-onomists scurrying into their safe spaces.)

 Two big questions:

1) Did Bentley, by meeting those performance targets, add value to the business greater than the amount of the bonus?

2) Were those performance targets for the long-term benefit of the business, employees and customers (and the environment), or for short-term, unsustainable, line-pockets motives?

The answers (and I don’t have them) will help determine the extent of acceptability of her bonus.

The other bone of contention is the huge buy-out payment. The principle of such a payment is sound: she gave up that money in order to join Thames, so it’s only fair that they compensate her. Whether that amount of money, originally due from Severn Trent, was an acceptable remuneration, is another question.

Even removing bonuses and buy-outs, Bentley’s pay package is still huge compared to most others’ including her employees. Maybe if she and her fellow executives were paid less, the company could afford to pay more to their staff. The four Execs were paid a total of £3.24m for the year to 31 March 2022. Thames Water employs about 7,080 people with a total remuneration bill of about £410m. If Bentley & Co had their pay slashed to, say, £250,000 each (total £1m), the freed-up £2.24m shared equally amongst their employees would swell their pay packets by £316 per person per annum, or just over £6 per week, pre-taxes. What's that - two Starbucks? Further, less money would go to the Government, so fewer nurses and teaching assistants, etc., because of the lower rates of tax paid by lower (or less high!) earners.

Bentley explained on Today that her salary is benchmarked against that of other utility executives’ in the Southeast, but many complainants argue that no executives should receive such high salaries when they’re supplying a basic, vital commodity – water; “water is a public good”, it has been claimed. ‘Water’ might be, but what about tasteless (or delicious depending on your taste buds), sparkling-clean, fluoride-laden water pumped directly to your kitchen and bathrooms 24/7/365 (God-willing)? If you don’t want to pay what that costs, then invest in a few water butts and dig yourself a pond. And if you don’t want to pay for your waste water, mixed with your you-know-what, to be pumped away from your home, then dig a hole in your back garden and use that instead.

I’ve also heard: “Thames is polluting our rivers! Bentley shouldn’t be rewarded, she should be thrown in jail!” Does that go for the automotive industry as well, which has been causing asthma-induced deaths for decades, and is allowed decades to right itself? The water industry also has a decades-long plan for self-improvement. Surely the “All animals are equal” mantra should apply.

Going back to Bentley’s claim that her salary is benchmarked against that of her peers, this is key, even if you feel it’s just not right. Executives follow the money – many, many people do – and if the water industry didn’t offer as much as other commensurate posts, or if they were threatened with jail for taking on a difficult, complex, stressful, family-life-defying, vilified role, they’d go elsewhere, leaving the less-able to take the top jobs.

If I’ve got my facts right, if my logic is flawless, and Bentley’s pay is overall justified, does that mean that it’s the capitalist system that is well and truly broke, and a socialist utopia would bring about a far fairer society where executive pay would be limited by law? Has there ever been a socialist utopia? Socialist dystopias, on the other hand, abound.

Am I just shrugging and dismissing what many people reasonably perceive to be a too-high salary? Nope. I’d like to think, and I know it’s true in a lot of cases, that well-paid Execs give a lot of money to good causes, which is a bit like a voluntary additional tax. Without such high salaries and generous donations, good causes would struggle or fail more than they do already.

To coin a phrase, size doesn’t matter; it’s what you do with it that counts.