Another reason to cut bankers’ pay: the softer the product, the easier the job
Is it harder to run a country or a global company? Variations of this dinner- party gambit cropped up wherever I went last week, offering a way of drawing together half a dozen business stories and political arguments. So here’s this week’s Any Other Business competition. Place the following in descending order of the difficulty of their jobs: David Cameron, George Osborne, Bob Dudley, Stephen Elop, Marius Kloppers, António Horta-Osório and Gerald Jones.
Bob Dudley is the American who was recently promoted to chief executive of BP and is now dug in on the Russian front. You also need to know that Elop is the Canad-ian head of the Finnish phone maker Nokia; Kloppers is a South African who runs BHP Billiton, the Anglo-Australian mining giant; and Horta-Osório, from Lisbon, takes over shortly as chief executive of Lloyds Banking Group, having previously run the British arm of Santander of Spain.
Smart readers will have spotted the odd man out. Gerald Jones is the former chief executive of Wandsworth borough, which is neither a country not a company. But he deserves mention because in his final year in this none-too-testing post, he earned more than double the salary of the Prime Minister, who I think we can agree has a very difficult job indeed. Jones is one of more than 200 local government chiefs who have been trousering more than the PM — underlining that, whatever selection of leaders we choose to compare, the degree of challenge and level of pay are unlikely to show a logical relationship. So let me leave that strand aside until I come to the bankers at the end.
Feet up at No 11
As between Prime Minister and Chancellor, one former civil servant offered this insight. Being Chancellor is easy: you set a fiscal course, take credit if the economy blossoms, blame global trends if it doesn’t, and delegate awkward questions to junior ministers. That’s why it suited Ken Clarke so well, and it’s why the chancellorship is such a poor training for the job next door — hence Gordon Brown’s disastrous transition.
A Prime Minister cannot duck the awkward questions and twists of fate that daily threaten to derail purposeful government. Unlike a corporate chief, he cannot leave his spin team to defend him from short-term flak while waiting for his long-term strategy to show results. He must do whatever it takes to keep the whole accident-prone show on the road. And if he launches a new brand like ‘the Big Society’, his competitors will kick it half to death without the handicap of actually having to offer viable alternative products of their own.
So far, then, it’s evident that running a (free) country is a lot more demanding in personal terms than running a business, while running a finance ministry is probably a lot less so. But what of comparisons between one kind of business and another?
More physical, more difficult
Here, I suggest, the answer is largely determined by the physical nature of the product: the more physical, the more difficult. The theory could apply to complex manufactures such as aero engines and nuclear generators. But even more difficult these days is the sector in which the product is the earth’s carbon-fuel and mineral wealth.
Take BP: having become a pariah in America and suffered colossal damage from last year’s Gulf disaster, the oil giant under Bob Dudley’s leadership is betting its future on Russian joint ventures. But its partners in the poisonous TNK-BP set-up are intent on spoiling a new deal in the Arctic with Rosneft, whose Kremlin controller, Vladimir Putin, seems reluctant to resolve the row. That’s what I call a tricky situation, requiring balls of tungsten as well as more conventional corporate attributes.
But almost as challenging is the choice facing Marius Kloppers at BHP Billiton, who was due this week to announce record half-year profits on the strength of rampant commodity prices. Shareholders are clamouring for a cash-back to celebrate, but Kloppers’s problem is how to sustain longer-term growth in a company that is already the world’s biggest miner and has been rebuffed by the two biggest takeover targets in sight, Rio Tinto and Potash Corporation. If he can’t please investors either with cash or ‘transformational’ deals, his job is on the line — and if there’s literally nothing big enough on earth worth buying, he may have to check out adjacent planets.
Soft money
Next, Stephen Elop, the former Microsoft executive who moved to Nokia last year, and has now announced what amounts to a rescue for Nokia via a tie-up with his former employer: Nokia’s failure to compete in the ‘smartphone’ market against Apple and Google is to be rectified by adopting Microsoft operating systems. This is traumatic for the Finnish company — Elop talked about ‘standing on a burning platform’ — but if the turnaround works, it could happen quickly. It’s easier to make change happen in software and electronics than in sectors where the logistics and the politics are in every sense heavier. And the 21st-century consumer is incredibly fickle. So Elop has every chance of getting Nokia back into the game.
Finally, what of Senhor Horta-Osório as he takes the Lloyds helm? Banks, on this analysis, are the easiest of all big businesses to run, because their products are the least physical, the least differentiated by design or patent: money is really just a concept. Banks buy market share at will by offering more aggressive terms (which of course also makes it easier for them to get into trouble) and like Chancellors they get a free ride on the economic cycle. So if there really was a logical relationship between remuneration and difficulty, a new bank boss would be paid no more than Mr Jones of Wandsworth, and a lot less than a Dudley or a Kloppers. And how much will Horta-Osório earn in his first year at Lloyds? Up to £8.3 million. So much for clever theories.
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