4′s really one of these almost litmus test statements that probably comes down to your worldview. I’d personally say that “firms that have higher profits offer more high powered incentives” to produce the incorporated business version of “people with higher incomes have more money.”

If we could pay one guy £1 million pounds per year for 2 years and make twenty-four billion nine hundred ninety-eight million pounds profit* on it we would not be in this situation to begin with.

*Linguistically I’m not sure if it’s still called profit if you’re investing to not lose your own money. Technically I think it means you would *only* lose the £2m you spent on the guy.

Also, we have to pay a guy millions of pounds just to get the billions of pounds we put into a bank back out of it? Up is down.

Edit: Oh god, I’ve just had a horrible thought:

>”In exchange for your accomodating services, the Nigerian National Petroleum Company would agree to allow you to retain 10%, or US$4 million of this amount.

> However, to be a legitimate transferee of these moneys according to Nigerian law, you must presently be a depositor of at least US$100,000 in a Nigerian bank which is regulated by the Central Bank of Nigeria.” (http://www.quatloos.com/scams/nigerian.htm)

That is on top of the potential £35.5million package he has enjoyed since he moved to RBS in 2008.

It is made up of pay, pension, bonuses, shares and a long-term incentive plan that is worth up to £4.8million a year, four times his £1.2million basic salary, and is due to start paying out from 2014 if he hits certain targets.

This is how it is calculated:

2008: £4.99million in shares instead of pay and bonuses;
2009: £6.9million total package;
2010: £8.16million total package;
2011: £8.08million total package;
2012: £7.38million total, including up to £4.8million long-term incentive plan, salary of £1.2million, £420,000 in pension contributions and his bonus which was worth £963,000 when issued last week but was expected to top £1million as RBS shares rise in value;
2013: RBS have set aside £3.3million of shares for his bonus next year. The exact size will be decided this time next year.

Mr Hester has presided over a 40 per cent fall in the RBS share price and failed to hit the Government’s targets for lending more money to businesses.

http://www.dailymail.co.uk/news/article-2093630/RBS-boss-waives-1m-bonus-Stephen-Hester-feared-pariah.html

Often times people forget that value (an economic concept) is subjective, which means that my valuation as an un-involved outsider has no bearing on the valuation of the ones involved. I think Louis Vuitton bags are a waste of money, but I know people demonstrate preferences that are different (ie. they make trade-off decisions I wouldn’t).

If you’d done half as good job and we got £25 billion back instead then your saving of £1 million pound per year x 2 years on salary/bonuses would start to look pretty fucking pathetic wouldn’t it? You would have cost us twenty-four billion nine hundred ninety-eight million pounds.

People are acting like Heston caused this problem. He did not. He was brought in after the problems to try to sort it out because he seems like the sort of bloke who could. 

Frankly I’d prefer we had someone like that trying to do the job, and a share based bonus seems to me like a pretty damn good way to incentivise him to do it well.

Could you not equally say “larger companies can afford to pay more, and receiving a higher salary makes one more prone to self-justification (‘my contract’s really tough,  so I earn this salary’)”?

Please don’t mistake this for snark, I’m actually genuinely interested in how people try and control for this in studies. Have you got a link?

Given the fact that the poppy is bought in support of a charity that supports ex-servicemen and women, and is worn to honour the fallen on our equivalent of Veterans day, you couldn’t have chosen worse words for the gag.

Indeed, the most recent study I found that came from the Harvard business school  “Matching Firms, Managers, and Incentives”  – August 2011  says: -

(2) Managerial outcomes are linked to incentives: in equilibrium managers who face steep contracts exert a higher level of effort, receive a higher expected compensation (both total and variable), and obtain a higher overall expected utility;
(4) Firms that offer more high powered incentives have higher profits.

That said, it is a shame that the previous (left-wing) Government didn’t negotiate a better deal as shareholders…

Isn’t that a tautology? Can someone check?
http://en.wikipedia.org/wiki/Tautology_(logic) 

There’s no way *anyone* is 2 million pounds worth of irreplaceable.  Let alone the US CEO salaries that are one or two orders of magnitude larger.

CEO’s can demand millions because it has become normative in their little self-dealing sub-culture.  In Japan, CEO pay is far lower; few would argue that it’s because the talent (or the country) is so much poorer.

People are paid based on how much they would cost to replace. Doctors, while scarce, are not nearly as scarce as CEOs capable of running 148K employee companies. Now I’m not saying this guy has the ability to run RBS well, but finding someone else who can do the job and won’t ask for the same or more money is quite difficult.

Feudal lords were also great “job creators” for the serfs on their manors. In the case of professional management (i.e. not major shareholder), the capital being rented out is not even theirs. There are some important ways in which some types of high incomes can be justified. “Job creation” is not among them.