Top IT executives are as bad as big bankers

Peter Skyte, national officer of union Unite, has written a great opinion piece about the unfairness that exists in the IT sector in terms of pay, benefits and job security.

The big US service providers seem to be the worst offenders.

There have been a lot of industrial dispurtes of late and Peter’s article makes this less than surprising.

Here it is:

A tale of twin universes – how the Milky Way provides more milk for some than others

By Peter Skyte

“On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy.” (Jack Welch, ex-CEO of GE)

Shareholder value is still prayed in aid for all too many corporate decisions, despite the recantation of Jack Welch, albeit some time after he retired from GE.

In fact, the mantra of shareholder value is increasingly nothing more than a euphemism for individual and corporate greed. To make sacrificial offerings to the stock exchange altars in London, New York or Tokyo; companies slash costs, fire employees, extract longer working hours through design or default, and surrender the soul of once honourable corporate cultures through exacting and draconian ‘efficiency’ drives which recognise the cost of everything and the value of nothing, in the process alienating customers and employees.

Whilst the rhetoric is that employees are the greatest asset, the reality is that in many companies employees are regarded as a cost to be squeezed through cuts in workforce numbers and – if they can get away with it – in cuts to pay and conditions in absolute or relative terms.
Whilst obloquy is heaped on bankers, the IT sector is also a prime example of the twin and parallel universes inhabited by the many on the one hand making up most of the workforce and the few on the other comprising senior business leaders and executives.

A century ago the US banker JP Morgan said no company should have a differential greater than 20:1 for the average boss-to-worker pay ratio. According to CBI leader Richard Lambert in March 2010, in the past decade, the gap between boardroom bosses and workers in the UK has seen chief executives’ pay rise from 47 times the average wage in 2000 to 81 times today in the UK, with an even greater gap in the US.
In 2009, HP CEO Mark Hurd’s total package was calculated at $30,332,527. This is equal to 946 times the average pay in HP or 75 times the pay of Barack Obama as US President. By the way, this is the same HP that was pressing for 5% pay cuts from its workforce last year.
IBM CEO Sam Palmisano’s package in 2009 was calculated at $24,313,795. This is equal to 758 times the average pay in IBM or 60 US Presidents.

Such disparities produce a number of effects. The interests of senior executives are divorced from the rest of their workforces – job cuts, pay freezes and uncertainty and insecurity for the many produce sky high obscene pay and bonuses for the few.

The focus becomes that of ever shorter, short term financial engineering to boost reporting cycles rather than longer term hardware and software engineering and the creation of stable and sustainable high trust organisations.

Harvard Business School has reported that most schemes designed to align managerial and shareholder interests failed to do so. Instead, executive compensation practices just operated as devices to enrich senior business leaders, who usually received most of the stock options.

According to a study by the Work Foundation, ‘growing pay inequality corrodes the basic concept of fair reward that underpins a thriving society — and may also damage the performance and long-term success of organisations as staff become cynical and disillusioned.’

Chief Executives in some IT companies are now habitually accompanied by private security officers in visits to their own workplaces. What do they have to fear and what signal does that send?

At a time when many companies in the IT sector are seeking to secure further cuts in pay and conditions, or further pay freezes, it is right to focus on the gulf between the many and the few. Whilst the UK is now coming out of a recession which has hit many companies and people severely, most of the larger IT companies are not failing or ailing organisations.

Senior business leaders have rewarded themselves handsomely often at the cost of their workforces. Now it is high time that they properly reward their skilled and often over loyal workforces without whom these companies would not be where they are today.