Word of the Week 6 – Compensation

This post really concerns captains of industry and the like who place a high value on themselves and their achievements, or, if they don’t do it themselves, have remuneration committees of their colleagues do it for them. It has attributes of the diatribe or rant.

A normal person is paid. A normal person might work extra days covering for a colleague who is ill and be compensated for this with additional days off. But a CEO in banking or finance doesn’t get pay like the rest of us. When the ludicrous sums of money he receives are talked about, his ‘package’ (pay, share options, pension contributions from the company) is referred to as ‘compensation’. These two uses of ‘compensation’ are significantly different, the second case being a weasel word, giving the impression that ‘pay’ does not cover it for such high performing people. (And, yes, those would be the same high-performing people who caused the crash of 2008.)

Still on this subject, the word ‘earn’ is often used here. But if someone is given several million pounds a year (and even more millions in dollars) the most we can safely say is that the person in question is given this money. I have never seen any serious effort to demonstrate that all of the money involved is actually earned.

And then we have bonuses. Bonuses are said to be ‘earned’ when specified targets are met. How is this process managed? Warren Buffett described it once as follows. Those setting the target fire an arrow, walk up to where it has landed, draw a circle round it and say, ‘Look, we have hit the target!’

And lastly, while on this unsavoury subject, certain people in industry/finance have taken to using the adjective ‘metric’ as a noun. The first person I heard doing this was James Murdoch (son of Rupert) when he was being grilled in a public hearing by a committee of MPs. He obviously thought it sounded managerial.They might say something like, ‘By any metric our business is in better shape than it was this time last year.’ There is no stopping this, of course, but the word ‘measure’ still exists and I, for one, will continue to give it food and water.



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