High executive pay should reflect good remuneration across board

When President Uhuru Kenyatta last announced a raise in minimum wage by about 14 per cent to Sh13,674, it was seen as a noble gesture and there were cheers all around.

Fast forward to August 21, 2014 and courtesy of the Capital Markets Authority’s new “tell it all” policy, the salaries of listed companies’ CEOs and all their top executives are in the public domain.

The crowd that had cheered on the new minimum wage suddenly realised that the CEOs and executives they work under earn seven figure salaries per month.

Hue and cry followed this revelation that a few among us earn, in a single month, what many could never earn in an entire lifetime; at least not at minimum wage.

The haki yetu (our rights) mood caught on as many termed the situation unjust or downright obscene.

A few demanded to know what the cleaner and watchman in the same organisations were earning. Others wanted to know what one did with all that money. Some, on the other hand, felt the pay was justified.

All are entitled to their opinions. There are merits for the ludicrously high executive pay and there is a downside. The good thing about a CEO who is more than adequately compensated is that personal money worries are out of the way.

In the words of my current managing director, pay people enough so that they do not have to worry about money and they can focus on the job at hand. This is true especially when it comes to the top man or woman in the organisation.

What a lot of people don’t spare a thought about is the enormous burdens CEOs and their next in command bear. The demands at such a level call for sobriety, comprehension and attention to detail that few could ever master.

Personal finances thus cannot be allowed to make the list of what keeps a CEO awake at night.

At the risk of sounding callous, it is better if everyone in the bus daydreamt about riches; but if the driver of the bus was also to daydream, then everyone onboard is going to crash. A worthwhile pay is extremely important for optimal focus at the helm.

The bad side of sky-high executive pay, however, is the perception that accompanies it. The issue of astronomically high executive pay becomes thorny when it is looked at against, for instance, the national minimum wage of less than Sh14,000 per month.

When you factor in annual bonuses and other performance incentives that corporations pay their top executives, they are taking home well over 200 times the average annual pay of its lowest band of workers.

There is bound to be deep resentment from the bottom tier when such numbers are contrasted. It is no wonder one pay slip showing a net pay of Sh11 million a month was making rounds in the social media. People were simply trying to come to terms with the huge disparities that exist in corporate pay scales.

The ugly part is that because the hefty remuneration is tied to exemplary financial results, all emphasis is on financial performance and less about people. It can turn good folks into blind, money-minting cost-cutting robots. This is why downsizing and right sizing have become so rampant.

At the slightest dip in sales or profits, top-level executives immediately react with a restructuring plan that usually ends up in chopping of jobs.

As top executives don’t take a pay cut at the same time, it often appears insincere, especially when they turn right around and award pay increases, bonuses and other allowances at the top.

Most collective bargaining sessions today for union staff result in altercations because top level executives do not want to reasonably increase pay and benefits for workers at lower levels.

Agitation for better pay is met with resistance and threats of layoffs. The increments hardly surpass the five per cent mark per annum, with no other benefits.

Recent press releases, however, show executive pay in Kenya increases on average by double digits, even up to 38 per cent.

Salaries of most CEOs and top executives in Kenya is no pocket change. However, as a percentage of revenues and growth attributed to their tenure in office, it is a drop in the ocean.

The majority have earned that pay package through blood, sweat and tears. But they must not forget that they are not the only ones breaking their backs.

It is only fair that an organisation paying its CEO in the region of $100,000 monthly be willing to pay the rest of the staff relatively well.

Super-high executive payrolls must go hand in hand with a review of everyone’s remuneration within the organisation. It is bad to have a CEO package that is growing in leaps and bounds while the organisation is plagued with workers’ strikes.

It is also immoral to chop jobs at the bottom whenever a company performs poorly only to turn around and increase executives’ pay and bonuses.

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