On Wednesday it emerged that Ornua, the artists formerly known as the Irish Dairy Board, had paid nine senior executives a total of €9 million over the past two years.
The following day the head of the country’s biggest employers’ body stood up at its annual conference and said wage restraint was essential as the economy now faces significant threats.
If the costs of employment needs to be held in check, the business top brass are not setting much of an example. A string of annual reports recently showed big rises at most public companies.
The CRH boss, Albert Manifold, saw his total remuneration rise by almost a third last year to €5.5 million; at Irish Continental Group Eamonn Rothwell got an additional 40 per cent; Glanbia boss Siobhán Talbot got a hike of 16 per cent.
Paddy Power/Betfair paid departing former Paddy Power boss Andy McCue €3.75 million last year, and has appointed Gary McGann as non-executive chairman on a €450,000 package. It goes on and on.
Most of these packages involved share, bonus and pension payments as well as salary. We are told that they are “ benchmarked” against competitors worldwide.
Ornua, for example, is a big company with annual turnover of €2.5 billion, selling all over the world. But more investors in big companies are starting to ask the same question as the rest of us. How much is too much?
As well as the amounts, the level of annual increases in many of the annual report figures is striking. Not only are business chiefs paid a lot, but they are getting big hikes, many of them making the demands of the Luas drivers look almost reasonable by comparison.
People in top jobs get big rewards not only in Ireland but worldwide, though for many years a lot of big business leaders here seemed to escape the downside that should apply at the other side of this equation.
If you get a big whack when profits are increasing, then you should lose your job if you create a big mess.
The worst that happens in corporate Ireland is you move on “to pursue other interests”, with a nice pension and a severance deal.
The level of increases being granted are right now particularly generous.In an era of normal inflation a rise of, say, 15 per cent is nice, but when prices are static it is particularly sweet.
Dangers
And here we come back to the wage competitiveness argument made by Ibec boss Danny McCoy. He has been one of the most observant commentators on the economy in recent years, spotting the uplift before most others. So it is best to listen when he warns of the threats that lie ahead, and the dangers of competitiveness being eroded.
A similar call came during the week from the National Competitiveness Council, a government-appointed body set up to keep an eye on these things. From the price Irish companies pay for loans to the costs of everything from childcare to energy and insurance, it warned we are getting out of line.
You might note in passing that many of these factors have a much more serious impact on people’s standard of living than the water charges which, we are told, have dominated the talks on government . As well as affecting people’s pockets, these factors are also undermining competitiveness and proving a threat to job creation. With nervousness ahead of the Brexit vote likely to slow investment decisions, this is a risk to the outlook for growth.
The fact that inflation has pretty much stopped across the industrialised world is the backdrop to this. When prices are static elsewhere, and companies are under pressure to hold down prices as they sell into new markets, they cannot pass on the price of higher energy, insurance or loans.
Or wages. Hence the calls for wage restraint as businesses worry about ever-increasing costs bases in a world of zero inflation.
But the calls for employees to moderate demands will be widely ignored. We are in for a big battle. First, there is the “demonstration” effect from the big chiefs’ pay awards. I suspect these packages and the level of increases do not reflect what is happening in most companies in Ireland – and they are obviously not the case for SMEs. Yet even if they just reflect the rewards of the privileged few, these are the figures in the headlines.
Balance
Second, wage demands are driven by reports of record economic growth, with our 7.8 per cent GDP increase last year outstripping even China. These headline figures grossly overstate the real level of economic growth but they will drive demands in the public and private sector.
There is a balance to be struck here. Rising wages will support consumer spending and the normal cycle of growth – the trick is not to price ourselves out of markets and damage the ability of businesses to create jobs.
But if businesses want to preach restraint, then surely it needs to start in the boardroom? I suspect, looking at the shareholders’ revolts against pay awards in companies such as BP, that executive rewards are facing a lot more scrutiny, particularly if results turn down.
For the moment the bosses are trying to have it both ways, persuading themselves they have earned their millions while preaching restraint elsewhere.