Today's news that boardroom pay rose by 55% in the last year is depressingly predictable. If there is any single reason why the shareholder value management creed will not disapear without a fight, it's that it serves executives' financial interests too well. Three things are worth keeping in mind here.
Firstly, shareholder value is an effect of the rise of agency theory in business studies during the 1970s, which itself was due to a concerted funding effort by Ford and Rockefeller foundations from the 1950s onwards, to create a more functionalist view of the firm. This story is told well by Rakesh Khurana. Since the 1970s, future managers have been trained to view all problems in terms of incentives of maximising, self-interested individuals. And it isn't implausible, by that account, that top management could require 200 times as much incentivisation as the functions performed by employees within the firm.
Secondly, the argument above is utter nonsense. As the article notes, the FTSE rose by less than 20% during the last year, yet pay is supposedly linked directly to share price (albeit with discretion available as to when options are exercised). This makes it tempting to view shareholder value as pure 'ideology', sold in all directions by a coterie of managerial elites in order to justify their theft of shareholder and employee property. But that might be a little, ahem, old-fashioned for some tastes.
Thirdly, maybe it's equally old-fashioned to view these CEOs as part of a firm at all. It is doubtful that they view firms as more than a web of contracts and assets anyway, despite the smokescreen of 'leadership' and 'teamwork' that is thrown up to conceal the financial engineering that actually dominates their strategy.
Speaking in Coimbra last week, Robert Boyer argued that in the era of shareholder value, the CEO has gone from being the 'most senior wage-earner' to being the salesman, tasked with marketing a vision of the company's future profits to institutional shareholders. Perhaps it's not so far from the job of advertising, involving similarly hallucinogenic, wild leaps of logic. Eve Chiapello has also written about the shift in the notion of company 'accounts', from being a historical statement of actions taken that is offered to society (as implied by the expression 'being accountable'), to being a necessary basis for future speculation that is offered to potential investors.
In each case, it's possible to get a sense of the surrealism of corporate activity in the era of shareholder value. Nothing that happens in the present or has happened in the past carries as much weight as that which might happen in the future. That £4.9m average FTSE 100 salary is not a reward, it's the payment of a gambling debt, that could well be dwarfed by the running up of even bigger gambling debts going on right now.