Category Archives: Financial

The dangerous charity chief executive pay debate

There has been a lot in the press recently about how much charity chief executives are paid.

This is nothing particularly new. Pretty much annually the media decides to turn its glare onto the wage packets of senior staff, particularly chief executives, in the voluntary sector.

This time round the Telegraph kicked things off with an article entitled: ’30 charity chiefs paid more than £100,000′. Inevitably, the Daily Mail then couldn’t wait to stick its boot in, with the column ‘Hideous hypocrisy of the charity fat cats’. One little gem from said piece was: “It has emerged that for all their noble talk of helping the needy and emotive campaigns against inequality, senior figures in the poverty industry have been quietly pocketing hefty six-figure salaries.”

This dangerous, flippant sentiment angers and perplexes me, and I will briefly explain why here.

First, to get things into a little perspective, a paragraph from this Spear’s blog starts to demonstrate how things generally are back in the real world:

“The CEO of Oxfam is paid £120,000, and is responsible for a £360 million budget, 700 shops in the UK and 5,000 employees and 20,000 volunteers who work in over 90 countries across the world—some of them very risky places to be. £120,000 doesn’t feel like a lot in the context of that job description. The CEO of Next also runs 700 shops (but no humanitarian aid) and gets nearly £1.5m.”

I run a small business myself. Because I set it up I don’t, and never will have, the same salary expectations as a chief executive who does not own the organisation they are running. But I have already been able to start to appreciate just how difficult it is to run an organisation.

There are staff who are reliant on me for their jobs and their wage packets; suppliers, rent, rates, service charges, plumbers, electricians, and multiple other bills need paying every day – and the buck will always stop with me for that. If a customer is ever unhappy with their experience, if the council decides we are breaking a rule, if we get a terrible review in the press, if an accident occurs at the workplace, if the price of wheat increases, if someone calls in sick, if we have a break in and all our equipment and stock is stolen, if the business is flooded, if our VAT is miscalculated, this will ultimately always be my problem to deal with.

Already, I know that if I wanted to hand over all of these stresses and hours and responsibilities to someone else to manage the business for me I would need to pay them significantly for that.

If I then multiplied all of this by many hundreds or even millions and increased its complexity to include overseas work, lobbying government and negotiating with multiple sources of funding, I can only begin to imagine the pressure upon someone who is running a much larger, charitable, organisation. It is not the kind of pressure and level of responsibility that just any random person would be able to handle.

The kind of person who would be willing to take this on and could perform to a high standard would be able to get a very well-paid executive role in any sector.

In an equivalent private sector role it is likely that this person would be paid in the high hundreds of thousands, potentially a seven figure sum, with share options, a bonus, a plush office, and most importantly the knowledge that this pay packet would be likely to grow and grow.

In the charity sector, the Telegraph seems to have a problem with this person being paid £100,000. As a regular donor to more than one multi-million turnover charity, I would personally be quite worried about the calibre of chief executive in place if they were earning much less than that.

By Sophie Hudson

Paper on the Quality and Outcomes Framework

For any medics or managers who this subject may be of interest to, a shortened version of my undergraduate dissertation on the Quality and Outcomes Framework has now been published online here by the London Journal of Primary Care.
 
It looks at this form of performance related pay which is being utilised to reward our GPs and finds that there are some worrying consequences for both GP work motivation and patient well-being.
 
And yet again, as with so many other areas of our society, I find that the Government doesn’t know best, as it often thinks it does, and in fact they need to start listening a lot more to the people who naturally do know better about their own area of expertise.
 
By Sophie Hudson

Is it really so wonderful to win the lottery?

So, the second of two EuroMillions winners from the UK has now come forward to claim the £45.5million they won in the latest draw.

And I can’t help but wonder, after obviously feeling ecstatic for at least a few days or weeks, just how much of a positive experience this will be for them.

Obviously I would only hope it will bring them the joy they would imagine, but there do seem to be an increasing amount of stories where this just doesn’t turn out to be the case.

It actually must be terrifying to win the lottery, especially with a jackpot as large as the one the latest two EuroMillions winners are going to adding to their bank accounts.

When it starts to sink in that this isn’t just a couple of hundred or even just a couple of thousand pounds, and the magnitude of what exactly a million, never mind, 45.5 million pounds really is, you must feel confused over what exactly to do with this.

And indeed, in practice it doesn’t seem to bring everyone a huge amount of happiness.

A win becomes a loss

There have been plenty of stories about people who win this massive sum of money and just can’t manage it properly. Before they know it, they’ve overspent and find themselves in debt or eventually bankrupt.

Yes, obviously on many fronts life would be a lot easier if we were suddenly handed millions of pounds simply for picking a few numbers.

But being given all of this money at once, with no experience of what exactly this money means and how easily it can then be spent can be just a little too much for many.

Your life as you once recognised it is taken from you before your very eyes. You’ve either got this dark secret in the bank which you’re terrified of making public. Or you’re terrified that because everyone knows your secret they are now out to get you.

In some cases, winners no longer even feel safe. It was reported in The Washington Post that one lottery winner in the US had the small problem of his brother hiring a contract murderer to kill him and his sixth wife.

You suddenly find yourself defined by this huge sum of money, even if only in your own head.

And I’m sure there are plenty of lottery winners out there whose winnings have brought them happiness, but I can’t help but wonder if these are the ones who won some of the smaller sums or who hired a financial adviser to help them manage their earnings.

The best advice I’ve heard is from Rich List compiler Philip Beresford. It was reported in the Daily Mail that he said of lottery winners; “If they’ve got any sense they’ll keep very, very quiet about it or go and live in Monaco, where they’ll just be one of 1,000-odd millionaires”.

Yes, it may be a bit of a depressing prospect to have to hide yourself away from your normal life in order to have a chance at enjoying your new one, but at least this way you won’t end up feeling like a walking target and you might stand a chance at feeling ‘normal’ in this very unnormal situation.

By Sophie Hudson

Investment – an ugly words game

It struck me this weekend why perhaps the words ‘investment’ or ‘finance’ or ‘stocks and shares’ send such a shudder down many people  and make them go running for the hills.
 
I spent much of the weekend testing someone who was taking an investment-related exam today. And, as someone who writes a blog for fun, and reads as much as possible, I honestly struggled to get through a lot of the questions. They were full of such ugly words, all jumbled together, that they barely seemed to make any sense.
 
Why is it that investment related language all seems to be so repelling? Are we supposed to be frightened off at the beginning? Is this some kind of a test? Only the resilient get through and then have a shot at making any of the real money?
 
Humans are very visual beings. Actually, it’s not even just about being visual in this instance. We can also hear things. So why on earth do the people who come up with all these investment terms continue to invent such horribly ugly phrases?
 
Just look at this select group of unpleasantries: backwardation, contango, debenture, basis swap, arbitrage, credit default, REIT. I could go on for a lot longer but quite frankly, I don’t want to mar my blog with any more of it.
 
Not one of those word gives me any inclination to continue reading. I almost want to avert my eyes away from the page.
 
I’m not saying it should be more basic. It should just at least attempt to be more beautiful. It’s no coincidence that it is the beautiful words in life that are used the most and are the most admired. Language that is beautiful is a pleasure to read. It makes the eye want to continue travelling across the page. It makes the reader imagine the sound of the word. And above all, it makes the reader sigh with delight rather than recoil in distress.
 
I really wish investment-related language could be snazzed up a bit, maybe that would make it slightly more alluring and it would stop putting people off before they’d given calls and puts and yields a proper chance. Instead, you’re so turned off by the words themselves that you’re certainly not even going to try and find out what on earth they could possibly mean.

Crabby About The Crunch

If one more person tries to make some stupid comment about there being “too much coverage” of the credit crunch in the press right now, I’m going to lose it.

 

I’ve had the unlucky experience of meeting a number of nit wits recently who wear financial ignorance like some kind of comedic badge of honour. No, it’s not funny that you work hard all day, paying extortionate levels of tax and you haven’t bothered to read about even one of the numerous multi-million pound bail-outs which have been catered for with our money over the last few months.

 

I’m not one of those bitter people who is angry that our tax money has been spent in this way, I after all, have bothered to read about the enormity and the seriousness of the situation that we are facing.

 

Our economy is spiralling out of control. What I find most frightening is the fact that not even the financial experts (as in the people who make knowing about these things their living) can predict how we are going to stop this spiral, or where exactly it is going to end. Sorry, I take that back. They do give predictions, but I can guarantee that by next week, or even by tomorrow, these predictions will yet again change as fast as a WAG trades footballer boyfriends.

 

Maybe it’s not all bad though. Maybe we will all be able to finally go back to the basics. I read an article recently which described how for years during the boom (it feels weird talking about it like it has been and gone; when we were in it, it didn’t feel like a boom) it was impossible to get rid of allotments in the cities. Now, since the big CC, there is a waiting list for them. It seems people want to grow their own food now to save money. Who would have ever predicted this was going to happen only two years ago?

 

But, even if you are of the guise that money isn’t everything in life, the point is that, at the end of the day, everything in life boils down to economics, and that’s a lot bigger than just shopping and spending money at nice restaurants. (For anyone who hasn’t read it I would highly recommend ‘Freakonomics’ which illustrates this magnificently).

 

The credit crunch will, and for many already has, affect us all, and we will all see it in different ways. Whether it is in the form of redundancy, a lower interest rate on your savings or your favourite pick and mix store no longer trading, it will affect everyone personally at some stage.

 

The inevitable outcome for everyone is that they will need to be more prudent with their money and the regular (even once every couple of months is pretty regular) splurges we were all used to before will need to become a thing of the past. Just because we may not understand all of the terminology behind the credit crunch it doesn’t mean that we can just ignore its existence.

 

Just because something isn’t easy to read in the paper, it doesn’t therefore mean that we should all get bored and demand that something else is reported – go watch a soap if you want things to move on the minute they know the audience is getting a bit bored.  

 

Maybe the reason it is so prevalent in the media is because the people who make it their business to research this every day, the journalists, can see that this might be kind of a big story. It is everyone’s responsibility to understand our economy and take care of their finances. We are in a mess at an individual finance level as well as a macro-economic level. It’s hard out there and life is bloody expensive, but to just bury your head in the sand and allow your finances to get totally out of control will only add to the country’s problems right now and you will not be doing yourself any favours in the long term.

 

Bet you wish you’d looked for the best ISA rate now, don’t you? Oh God, please don’t be sitting there scratching your head, wondering what on earth an ‘ISA’ is.