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Jun 30, 1995

Fat and Happy

Extremes in executive pay should be tempered

To the average retail shareholder, there is a cruel irony in the hyper-inflation associated with executive remuneration - especially when the justification given for an increased package refers to the CEOs successful paring back of the staff roll-call to a barely workable minimum.

That's because most retail shareholders identify more closely with companies workforces than they ever will with their managements. And they wonder why the CEO should be allowed to go on being fat and happy while the employees are obliged to contribute to the obligatory lean and hungry look purveyed by fashion magazines and management journals alike. Why should their jobs be downsized out of existence - without the benefit of generous lifetime pension packages or abundant parcels of stock - while board members simply take up another directorship and exercise a few more share options?

But the tide may be starting to turn. On the one hand, the force of the public and media outrage at corporate excess is now persuading both companies and governments to start changing the rules in an effort to limit executive greed. On the other hand, management gurus have identified a new business problem which they can offer to help companies solve - which might just lead to a more cautious approach to rightsizing.

Like all management theories, this one comes replete with its own jargon and the buzzword here is corporate anorexia. As the drive for efficiency produces ever leaner companies, the gurus are now suggesting that these may not be as healthy as they look. Thin, rangy and apparently alert, they may, like an anorexic youth, be putting their very existence in danger. The starved seeker of the body beautiful or eternal youth may succeed in shedding unsightly fat only to find they are courting danger, with no spare resources to call on.

Where this will lead is anyones guess. Certainly the first CEO to argue for relayering, or upsizing, is only likely to win friends among workers and individual shareholders at the expense of alienating institutional investors and stock analysts - and there are few companies for whom that will make good IR sense. But maybe a reduction in extremes - whether by tempering excessive executive pay or by bringing back a little slack into increasingly stretched operating divisions - could reassure investors and commentators of all kinds that the old exhortation about moderation in all things still has some mileage.

Staff Writers

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