Minimum wage should take account of total pay, says retail chief

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Sir Ian Cheshire tells CIPD event approach to reward must change – and executive remuneration has become ‘embarrassing’

Minimum wage levels in the UK should take account of the total reward package received by employees, according to one of the country’s leading retail executives.

Sir Ian Cheshire, chairman of Debenhams and a key government adviser in his role as Whitehall’s lead non-executive,  said the focus on a single hourly rate made retailers “nervous” and should instead shift to a total reward package, which in practice might include pension payments, benefits such as health insurance or gym memberships, and even the benefits of flexible working.

Speaking at Big Tent 2016 – a CIPD-sponsored event in London that formed part of the ongoingThe Future of Work is Human series of events and reports – the former chief executive of Kingfisher said: “There’s no doubt that failing to pay a decent wage should be unacceptable, but we need to look at the total number, not just a single point.”

The broader problem with pay, according to Cheshire, was that it had become “divorced from purpose” in most businesses. “Quite a lot of it is a reward rather than an incentive because it lacks purpose and context,” he said. Even in entry-level jobs, it ought to be possible to tie remuneration to the wider aims of the organisation: he cited John Lewis’s employee-shareholder structure and the work of Whitbread (where he is senior independent director) to align the pay of store staff with net promoter scores from customers.

Cheshire was scathing about executive pay, while recognising that he and others had benefited from spiralling senior salaries and the growth of a bonus culture. “We need to massively simplify CEO structures,” he said. “We’re in a situation where few people even in reward consultancies understand pay.”

He suggested share schemes with the genuine capability to “claw back” payments in the event of poor performance were a more intelligent way of paying executives than focusing solely on the annual bonus.

CEOs’ earnings, he said, had become an “embarrassing symbol of disparity” and had inevitably led to calls for ratios between the highest and lowest paid inside organisations to be published. “I don’t mind entrepreneurs, who put their house on the market to get their business started, earning as much as they like,” said Cheshire. “They have taken a risk. I don’t think chief executives have taken the same risk.

“I’m in favour of publishing as much as you can [on pay ratios], but you have to remember it was transparency over CEO pay that created this whole arms race in the first place. Nobody volunteers to be an averagely paid CEO.”

The Big Tent event heard from a range of speakers, including journalist and TV presenter Adrian Chiles – who said rigid class structures and the fact people tended not to mix with those from different backgrounds had led directly to the Brexit vote – and London Business School professor Lynda Gratton, who expanded on the ideas in her recent book, The 100-Year Life.

Former shadow education secretary Tristram Hunt urged business leaders to press for an end to GCSEs within 10 years, suggesting the UK was now testing a group of “school leavers” who were not leaving school, at exactly the same time as countries such as Singapore were reducing their reliance on standardised testing.

Peter Cheese, CIPD chief executive, said such events were useful because they brought audiences including HR professionals, government and business leaders together at a time when the broader legislative agenda was shifting rapidly. “We have to think about how we better connect the world of government to the world of business because we have a shared agenda,” he said. “Public and private are coming together – and the government is telling us that if we don’t sort certain things [like executive pay] out, they will sort them out for us.”

 

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Sir Ian Cheshire tells CIPD event approach to reward must change – and executive remuneration has become ‘embarrassing’

Minimum wage levels in the UK should take account of the total reward package received by employees, according to one of the country’s leading retail executives.

Sir Ian Cheshire, chairman of Debenhams and a key government adviser in his role as Whitehall’s lead non-executive,  said the focus on a single hourly rate made retailers “nervous” and should instead shift to a total reward package, which in practice might include pension payments, benefits such as health insurance or gym memberships, and even the benefits of flexible working.

Speaking at Big Tent 2016 – a CIPD-sponsored event in London that formed part of the ongoingThe Future of Work is Human series of events and reports – the former chief executive of Kingfisher said: “There’s no doubt that failing to pay a decent wage should be unacceptable, but we need to look at the total number, not just a single point.”

The broader problem with pay, according to Cheshire, was that it had become “divorced from purpose” in most businesses. “Quite a lot of it is a reward rather than an incentive because it lacks purpose and context,” he said. Even in entry-level jobs, it ought to be possible to tie remuneration to the wider aims of the organisation: he cited John Lewis’s employee-shareholder structure and the work of Whitbread (where he is senior independent director) to align the pay of store staff with net promoter scores from customers.

Cheshire was scathing about executive pay, while recognising that he and others had benefited from spiralling senior salaries and the growth of a bonus culture. “We need to massively simplify CEO structures,” he said. “We’re in a situation where few people even in reward consultancies understand pay.”

He suggested share schemes with the genuine capability to “claw back” payments in the event of poor performance were a more intelligent way of paying executives than focusing solely on the annual bonus.

CEOs’ earnings, he said, had become an “embarrassing symbol of disparity” and had inevitably led to calls for ratios between the highest and lowest paid inside organisations to be published. “I don’t mind entrepreneurs, who put their house on the market to get their business started, earning as much as they like,” said Cheshire. “They have taken a risk. I don’t think chief executives have taken the same risk.

“I’m in favour of publishing as much as you can [on pay ratios], but you have to remember it was transparency over CEO pay that created this whole arms race in the first place. Nobody volunteers to be an averagely paid CEO.”

The Big Tent event heard from a range of speakers, including journalist and TV presenter Adrian Chiles – who said rigid class structures and the fact people tended not to mix with those from different backgrounds had led directly to the Brexit vote – and London Business School professor Lynda Gratton, who expanded on the ideas in her recent book, The 100-Year Life.

Former shadow education secretary Tristram Hunt urged business leaders to press for an end to GCSEs within 10 years, suggesting the UK was now testing a group of “school leavers” who were not leaving school, at exactly the same time as countries such as Singapore were reducing their reliance on standardised testing.

Peter Cheese, CIPD chief executive, said such events were useful because they brought audiences including HR professionals, government and business leaders together at a time when the broader legislative agenda was shifting rapidly. “We have to think about how we better connect the world of government to the world of business because we have a shared agenda,” he said. “Public and private are coming together – and the government is telling us that if we don’t sort certain things [like executive pay] out, they will sort them out for us.”

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