As entrepreneurs understand better than most, having skin in the game is the best way to align incentives. The fact that all the blood, sweat, and tears aren’t only for someone else’s gain helps to drive innovation. It’s never just about the money (and innovators can actually only capture a tiny fraction of the value of their innovations), but it would be naive to suggest that those few percent aren’t a driving force.
It matters for many employees too. That’s why in the past we’ve argued for the expansion of Enterprise Management Incentives (EMIs), and why we’ll try to influence the Government’s preferred solution of reforming the tax-advantaged Company Share Option Plans (CSOPs).
For the same reasons, the Government is right to be considering removing restrictions on non-executive director remuneration, allowing them to benefit from share incentives. As fellow think tanker Robert Colville says: “If you have got a high-growth company and you want to attract the best advisers, directors and board members – especially Americans – you have got to give them a slice of the upside.”
I wouldn’t have to write this but for the fact that some have vehemently come out against the plans, connecting this reform with bankers’ bonuses (including in the articles linked to above). Even the CBI’s response has totally missed the point. They said, in response, that “high pay can only ever be justified by exceptional performance. In the midst of the cost-of-living crisis, and as many are faced with lower earnings, firms will be particularly mindful of the importance of fair executive rewards.”
This is woolly thinking, playing to the crowd but in a way that will make things worse. Of course the cost of living crisis needs addressing, but just because the timing means it might be “not a good look” right now, doesn’t mean the Government shouldn’t do the right thing for the long term. People are always complaining about how short-termist politicians are, but when they’re actually looking at the long term they’re also getting attacked. Ultimately, the policy will make the UK richer, giving us more to spend on helping the poorest during future tough times like these.
(A final thought: should politicians have skin in the game too? One proposal is for politicians’ pay to be linked to what happens to real GDP per capita over the parliamentary term, and to grow or be reduced accordingly. Our current MPs would have had over a decade of falling real wages had it been in place. Answers on a postcard please.)
Sign, Sealed, Delivered
I’ve trailed it for the last two weeks, so won’t go on too much, but on Tuesday we’re launching the All-Party Parliamentary Group for Entrepreneurship’s report on Entrepreneurship Education. To coincide with the launch, we’re asking for entrepreneurs and experts to sign a public letter calling on the Government to make entrepreneurship education a priority.
The proposals are significant, but we’re mindful of overloading teachers with more work. The curriculum is already packed with a lot and most of it’s there for a good reason. Instead, we suggest integrating entrepreneurship into subjects such as Maths, English, and Design. As well as giving children the right skills to adapt to whatever the future economy might hold, it has the added (and underappreciated) benefit of making school more enjoyable.
You can read the letter here, sign it here, and let me know if you would like to read a strictly embargoed copy of the report.
On the topic of education, we’re also currently doing some work with Young Enterprise on the value of applied learning in schools – specifically, we’re looking for case studies of what it looks like to put it into action, emphasising the usefulness of what pupils learn, and fully preparing them for the world beyond school, either through extracurricular programmes or within the classroom itself. If you happen to know of teachers or schools that really stand out in this way, then please do put us in touch by contacting my colleague Anton Howes.
On the Money
In other APPG news, we will have a new theme on SME Productivity, which we’re undertaking with the support of Virgin Money. The government is already doing a lot – or trying to – in this area, making it an opportune time to review progress and identify what is (and isn’t) working. On this, Nesta, who worked with BEIS and Innovate UK to deliver the Business Basics Programme, recently shared some key highlights of the successes and failures from the experiments of that programme.
As with all of our themes, it will kick off with a virtual roundtable on the topic. This will help shape the Call for Evidence, which will form the backbone of the final briefing paper. If this is a topic that you’re passionate and knowledgeable about, drop our events team an email to request a place.
Skin Deep