Its all about money??

Some background:
THE UK FTSE 100 is a list of the UK’s 100 most ‘highly capitalised’ public limited companies – i.e. the ‘largest’ businesses trading on the London Stock Exchange where the “economic size” of the business is measured by Share price * number of shares issued by the business.

Companies on the FTSE 100 include worldwide brands such as Shell, HSBC and Vodafone , and WPP (run by Martin Sorrel - see picture)

This BBC post from Robert Peston (the BBC business and economics reporter) has some amazing data on the salary packages for FTST 100 CEO’s.

This article states that FTSE 100 CEO salaries have risen 295% in the 10 years to 2008, while the value of the FTSE 100 FELL 23% over the same period!

In 2008,
• The median pay for a FTSE 100 boss was £2.6m. (average pay was a little under £4m) (*)
• The average cash bonus paid to FTSE 100 CEO’s was £514,000.
• The average CEO pay is now 128 times greater than that of the average employee.

(*) for the non-mathematicians –median pay is salary earned by the boss right in the middle of the 100 businesses ranked according to size of pay packet. The average is simply the total of all the CEO salaries divided by 100.

2 questions to think about before asking your teacher….

Q1) Regardless of company performance, it is all about money – why should we take motivational theories any of the motivational theories we study as being relevant in the real world?

The second part of the article on WPP (an FTSE 100 company - one of the worlds largest advertising compaies) describes the very generous "third leadership equity acquisition plan" put forward by the companies directors and recently accepted by its shareholders

Q2) Why do you think the owners of FTSE 100 companies (shareholders) continue to accept such generous packages for their CEO’s?

Obama unveils executive pay cap

I mentioned this BBC article in today’s class about Employee and Employer relations. Read it , and then answer the following questions:



Level 1: Knowledge
1) What is the value of the salary cap announced by President Obama? Which employees will have to accept this salary cap?

Level 2: Application
2) Explain the main objection to the salary cap mentioned in the article.

Level 3: Analysis
3) Use a theory of your choice to analyse the likely impact of this decision on executive’s motivation?

Level 4: Evaluation
4) To what extent will this decision help solve the current financial crisis?

Note Level 1 – Level 4 are questions based on IB standards where

Level 1: Knowledge
Level 2: Application
Level 3: Analysis
Level 4: Evaluation

Words in bold (define, explain…) have a specific meaning in the IB Diploma Program (DP). The meanings are in Glossary of Command Terms Section of the IBO DP Business and Management Guide available at the OCC and from my website