Executive Pay: the Smolensk Way
Hello and Happy New Year! Here in Smolensk butcher shop we recover from celebrate Christmas. This for us is feast with two backs. We do Western Christmas, 25 December to 6 January, then Orthodox from 7 January onward. However, we now plenty recoverment from spiritual state of fortnight’s alcoholic catatonia, and give view on vexating question of how decide what people is get pay.
Few year ago, Smolensk Oligarch Big Oleg is need lie low. He face violent repercussion when, by accident, he sell consignment of birds’ eyes to Birds Eye. (They want fish eye.) So as temporary measure, he divest self of extensive property portfolio, including my butcher shop.
“For timebeing you is own by shareholders. I give you 40% Pavel, your wife 40% and your assistant Yuri 20% of business. Shareholders will meet once every year and make decisions.”
“What decisions?”
“Oh you know. Whether it all going well. What you should all be pay.” So Oleg vanish for few years into obscurity as owner of Scottish Premier League club. And we give it try.
First year, all is go plenty fine. Irina vote with me on critical matter and we outnumber Yuri. He force accept my decision of defer invest in new pig rendering machine. He must wait for repair roof above where he work, which mean he often serve customer in snowdrift. And all he can do is frown when I restructure system of payment and rewards. As I got immense responsibility of supervise Yuri while he do all work, it essential I sustain 23 to 1 pay differential.
Then one day, eighteen month or so after Oleg disappear, Irina is drop bombshed.
“I sold my shares Pavel.” She explain she need money to buy self anniversary present, as I forget again, and because her previous deluxe Clooney Big One Ushanka-stimulo Supervibration is broke.
“But Irina, this just Oleg game. Shares is not real.”
“Since when must something be real for you to buy and sell? Look.” Irina toss me copy of British Capitalism by someone called Michael Brown, which plenty convince. I ask Irina who she sell shares. She pass to broker. He say they now control by hedge fund companies, banks and pension funds. I ponder development on way to work. When get there, Yuri drop own eggshell.
“I have sell my shares Pavel.” Unlike Irina, Yuri give them to his mother. He do this in exchange for change in her will. She bequeath him, not his sister, all her cats. “Yelena got no idea what do with them,” say Yuri, with butcher glint in eye.
Now I plenty worry. Shareholder meeting approach. Under Oleg rules, unpredictable shareholders, strangers, hold balance of power between myself and Yuri mother on big strategic decision. I fear my differential under threat. And bonus! As reward for secure 100% improvement in my productivity by halve time I spend in shop, I propose buy self twenty nearly new, gold embroidered, bottle green autographed Bobby George dart shirts on Sick-Bay (like E-Bay, but selling only vomit-damaged items). As meeting approach, Yuri unable look me in eye, but I see he quiet confidence.
So I am decide canvass opinion among shareholders. I do research. Most share is control by two fund manager, Caspar T Frotbuttflecker the Fourth, in New York, and Barrington Manely-Bland in London. They give it me plenty straight. “We don’t give the Santorum up a deviant rat’s ass what you pay yourself, you dumb Ivan,” said Caspar’s seventy-six year old secretary, Martha. “Just so long as you give us a piece of your pie.”
So I am make arrangement. And when shareholder meeting come, I plenty confident. In fact, no one turn up. Just me and Yuri. I drive through wage settlements, bonus and place immediate order for new shirts. Yuri puzzle.
“Why they not come?”
“They happy with me. I pay good dividend.” It true. To UK and US investors I send some of weapons grade uranium Big Oleg forgot he keep in butcher shop fridge. They sell to British, American, Iranian, Israeli and North Korean governments. And I send Yuri mother 600kg of minced yak testicle, rich in iron (since Old Grigori’s pasture is site of World War Two tank battle) which she say her cats is love, almost as much as she do.
Yuri shrug. “So much for shareholder power.”
It go on like this for couple year. When profit fall and I need find funds for my bonus, as well as for new mince and uranium dividends, I cut corner on customer care, and reduce meat content in Yuri goat pie to 0.03%.
Then, Captain Birds Eye get bigger fish to fry. He attempt claim expressions “shipmates” and “me hearties” as his intellectual property and retrospectively sue estates of Robert Louis Stevenson and Daphne Du Marrier. So, after extensive plastic surgery, Big Oleg return. I tell him what happen with shares. He shrug and make couple of phonecall. Soon all shares back in his hands. He snap them up cheap by start rumour Mohamed ElBaradei been spot in Smolensk and by give Yuri mother a clockwork cat-milking machine.
Month later, Oleg come shop. “I been look at what you pay yourself Pavel,” he say. “We need do something about it.” Oh my God, I think. He not going give customers say over my salary. He not going ask wider community. He not going suggest I bear environmental cost of my enterprise (like time I dump 63 rotten cow carcass in Smolensk Academy Swimming Pool).
“Don’t worry Pavel. You get sensible remuneration committee. Of one. You. But I may make you work.”
So it back to good old days. Provided I come up with tribute money regular and hide Oleg illegal animal imports – we got killer whale in bath at moment – he permit me reasonable differential over Yuri.
Oleg, like shareholder, is just want money. As long as they get it, I can do what I like. Funny, there is business theory that customer come first. Well, I smile, be nice, try not poison them (and shop only got fourteen thousand food poison case in last five year, and only six probable fatality). But my market is capture. Mine is sole walkable butcher shop for my wheezing, elderly, chain-smoking, alcoholic customer base. I do my best for them, but anything else, like ask them or other people affect by my business what they think I should be pay – well, that be silly chaos.
After all, does Tony Blair, stakeholder capitalism advocate, with ever-expanding business interests based on his profile as Middle East peace envoy, ask people of Palestine what they think he is worth?
