Irreplaceable or what…..?

Pity the poor directors at Easyjet. OK don’t pity them that much as they are well rewarded for what they do. But unlike every other major quoted company they have Sir Stelios Haji-Ioannou on their back. Whether it is about strategic direction, buying new planes, or as in this case executive pay, invariably Sir Stelios has a view and, as a very major shareholder, clearly he has every right to that view.

Presumably this is what Vince Cable has in mind when he set out his plans for the role that shareholders can play in curbing excessive executive pay.  He believes that like Sir Stelios, and all SME business owners, they should be treating the company’s money as their own in terms of monitoring how it is spent. It would be nice if those in government also thought in such terms.

However perhaps the more incendiary part of this story is Sir Stelios’ comment "I know as shareholders we could easily replace them with talented executives and experienced non-executive directors who will cost half as much in bonuses."

Wow! One of the arguments for high executive (or any other) remuneration is that you need to pay it to get the best people. These people are apparently so rare in the global economy that their pay has gone up exponentially over the past couple of decades. Football agents and clubs also use it, although even allowing for massive TV deals, there is absolutely no financial justification for footballers’ salaries at current levels. Now it seems that Sir Stelios has woken up to that old cliché that graveyards are full of indispensable people.

Perhaps it is the vast sums of money involved that makes logic fly out of the window on this. Record labels have almost bankrupted themselves on multi album record deals for artists who they thought were sure fire winners. A salutary reminder that, as far as people are concerned, like investments, the past is not necessarily a guide to the future.

Vast sums sadly are rarely available to SME owners to enable them to keep hold of their key people. They have to find other ways to hold onto them, ranging from share schemes to providing a workplace where people feel they are valued and enjoy working in even if the money is not the best they can get.

Actually the problem is not really that key people are irreplaceable because of course they are. It is more that the process of replacement is a real hassle. Mind you if you are currently having to find someone to replace the irreplaceable, don’t despair. You might end up with someone even better at a lower cost. Well that’s how multi-millionaires like Sir Stelios think…..