The yawning gap between the salaries paid to senior executives and the wages of their workers is just one of the many drivers of the discontent that permeates even apparently prosperous and stable liberal democracies such as our own.
Figures for the scale of the gap are astounding. The most recent annual study carried out by the left-leaning US Economic Policy Institute found that, by 2024, US chief executive pay had grown by 1,085 per cent since 1978 compared with a 24 per cent rise in typical workers’ pay.
The situation in Europe is not much better. The European Trade Union Institute calculates that the chief executives of Europe’s top companies are paying themselves 110 times more than the average worker.
The downside to this sort of inequity is well rehearsed both at the level of individual enterprises and for society as a whole. According to the European Trade Union Institute, “people who are dissatisfied with their pay and working conditions, and have little say over their job, are more likely to lose faith in democratic institutions”.
Unsurprisingly the Economic Policy Institute lay the blame for the apparently inexorable rise of CEO pay at the door of capitalism and particularly the stock market.
The pay of the chief executive of a company listed on the stock market is usually linked to the performance of its share price, something over which, in truth, they have only limited influence. Even a mediocre chief executive will benefit from a bull market that pushes up his or her company’s shares, the US think tank argues.
The best paid chief executives usually have some sort of leverage over the board of the company, the members of which are supposed to ensure that shareholders are getting their money’s worth, according to the Economic Policy Institute.
The salaries of chief executives of these listed companies are publicly disclosed and the remuneration of a handful of rock star chief executives becomes the benchmark, both inside their organisations and also at smaller or less successful listed companies and across the wider ecosystem.
Remuneration levels at publicly listed companies in turn have a trickledown effect on companies that are not listed on the stock market and, ultimately, the pay of top executives in Irish State-owned companies and bodies, a topic of perennial interest to the Irish public.
Rarely will a month go by without details of the pay packet of some semi-State company boss being made public. Such transparency is healthy but the underlying presumption always seems to be that the wages are excessive and unjustifiable.
This week we learned that 150 employees of the DAA – which runs Dublin and Cork Airports as well as duty-free operations at other international airports – earn more than €150,000. Not only that, the €374,830 earned by chief executive Kenny Jacobs is dwarfed by another, unnamed executive who earns between €475,000 and €500,000.
It’s a lot of money. The justification offered for these salaries is fundamentally a chain of relativities leading back to Elon Musk, Tim Cook and the other titans jostling for the title of the world’s highest paid CEO.
Ask Eamon Ryan. It was also reported this week that the former minister for transport warned his colleagues in the last government that departments and agencies needed more flexibility when it came to seeking chief executives for commercial State bodies.
“Given the sector-specific context and diversity in play, a ‘one-size-fits-all’ approach is not working in attracting talent, particularly when international consideration and comparators are taken into account,” he told the pay review group set up by the government last summer.
The Government has indicated it will update the rules on State company remuneration to reflect market rates,
It might be asking a bit much of the Irish Government to buck a 45-year trend that has seen senior executive pay increasingly divorced from reality, but they can’t escape the consequences of playing along with a system that the likes of the Economic Policy Institute and the European Trade Union Institute see as little more than a confidence trick.
There is a clear link in the public mind between the services offered by various State organisations and the money paid to their chief executives that doesn’t exist in the commercial sector. We are their clients, their customers and in a very broad sense, their employer.
We also have access to means when it comes to venting our displeasure – public representatives are only too willing to traduce the chief executives of State agencies and companies on the air, in the Dáil or anywhere else they think someone might hear them.
It would be absurd to describe Irish State company chief executives as victims. They know what they signed up to. But they are a soft target and, increasingly, whipping boys for the widening gap in income between the top and bottom strata of society.
