the times | Friday April 8 2022 2GM 39

Business

O’Shea speaks for all those bosses who say

pay is no motivation. Don’t believe them

would have all quit their jobs to join

the charity sector. That’s not what has

happened. Twenty years ago, the ratio

of CEO pay to average UK salaries

was about 47 to 1; at the last count, it

was 87 to 1.

Money in itself may not be a

motivating factor once you have so

much you don’t need to worry about

turning the thermostat down, but

every well-paid person I know

privately admits it’s important as a

way of keeping score (am I being paid

less than my fellow housebuilding or

hospitality directors?). That’s why so

many remuneration policies are

centred around comparisons.

In 2020, Tesco quietly removed

Ocado as a relevant competitor when

deciding pay, arguing that its upstart

rival was now a technology group, not

a grocer. By doing so, Tesco shares

outperformed its new peer group by

3.3 per cent a year rather than

underperforming them by 4.2 per cent.

Hey presto, bonuses all round.

What’s frustrating about O’Shea’s

posturing is that it deflects from

Centrica’s quite progressive pay

structure, whereby directors are

rewarded not only for increasing

earnings per share but also for

improvements in customer

satisfaction and employee

engagement. It’s an admirable

approach and one that more

companies need to adopt. If you

genuinely believe that your company

is there for all stakeholders, not just

the shareholders, the directors should

be paid accordingly.

If nothing else, it has been proven

that increased executive pay tends to

be divorced from any improved

company productivity. And a study by

the Chartered Institute of Personnel

and Development discovered that the

majority of employees find their own

bosses’ high pay demotivating.

However, I’m not convinced

Centrica should be a poster child for

this new methodology. As I waited 57

minutes on the phone for a British

Gas employee to chat to me about my

eye-watering energy bill, I noticed the

front page of its annual report was

entitled Helping you

live sustainably,

simply and

affordably. Yeah, pull

the other one.

’’

Harry Wallop is a consumer

journalist and broadcaster. Follow

him on Twitter @hwallop

Harry Wallop

salary? You would not. But it is an

assertion repeated time after time by

bosses, as a way of deflecting from

their Bollinger bonuses.

O’Shea explained, “money is a

hygiene factor”. It was a formulation

that baffled me. So much so that I

looked it up and discovered that it is a

well-established theory, proposed by

the psychologist Fredrick Herzberg in

the late 1950s. In short, money is

demotivating if you don’t have it, but

not motivating if you do.

There’s an elegance to the theory.

But I don’t buy it. Otherwise, chief

executive pay would have climbed to a

certain level and then plateaued, as all

the execs realised they had more than

enough to pay for their second holiday

home and third divorce. Or they

I suppose we should

applaud Chris

O’Shea’s refusal to

hide under a rock.

There are plenty of

chief executives, faced with the

mounting anger of their customers

and the public at large, who would

have firmly said “no” to being

interviewed by this newspaper. But

O’Shea, chief executive of Centrica,

the parent company of British Gas,

has what I can only describe as an

admirably thick skin. Or possibly a tin

ear. Maybe both.

This is a man that has just increased

the bills of millions of his customers

by on average 54 per cent a year — or,

in my case, 61 per cent to over £5,000

a year. No, I do not have a sauna in

the garden or a cannabis farm in the

attic. Just four children and not a very

well insulated end-of-terrace house.

Yet there he was last weekend

answering questions from this paper’s

energy editor while looking like a

mature student trying to chat up

freshers in the college bar with his

hipster beard and hoodie that

proclaimed on the front: “Why be

racist, sexist, homophobic or

transphobic when you could just be

quiet?” Profound, man.

My favourite bit in these chief

executive interviews is when they are

faced with the quickfire Q&A. O’Shea

was asked whom he most admired. He

answered: “Muhammad Ali, because

of the way he participated in the civil

rights movement.” Which makes a

change from nominating Nelson

Mandela, I guess.

Then he was asked if money

motivated him. To which he replied:

“No. If money motivated me I

wouldn’t be here.” Which makes him

sound as if he’s the poet laureate and

is being paid in nothing more than a

butt of sherry and we should be

grateful for his munificent sacrifice

and transcendent art. Last year, he got

£875,000 in basic pay and pension.

I should point out that he turned

down a bonus equivalent to 50 per

cent of his pay “given the hardships

faced by our customers”, and his

predecessors at Centrica over the past

decade have enjoyed an annual salary

of variously £4 million and £5.7 million.

So maybe he thinks he’s on fat cat thin

gruel. And, true, compared with the

£2.7 million that his fellow FTSE 100

chief executives received last year on

average, he is poorly paid.

But pass me the world’s smallest

violin. In all other respects, he earns a

stonking salary. Even his reduced pay

puts him in the top 0.1 per cent of all

taxpayers in the UK.

It’s not his pay that I begrudge,

however. I genuinely would not care if

he earned triple his salary. It’s what he

said about it that bothers me.

Let’s put aside him declaring “I’m

not coin-operated”, a phrase likely to

enrage those customers having to take

on two jobs to find enough coins for

their prepayment metres. It was his

claim that money did not motivate

him. Really? Would you really run a

former nationalised utility —

complete with the burden of axing

5,000 jobs and undergoing a bruising

“fire and rehire” showdown with

workers — on a boiler engineer’s

‘‘

Cazoo ‘still

on the right

road’ after

losses widen

Callum Jones

US Business Correspondent

A British online car retailer has fallen

deeper into the red after investing

heavily in expansion and counting the

cost of its stock market listing in New

York last summer.

Cazoo unveiled a sharp rise in annual

revenues yesterday as it drove further

into Europe’s second-hand market, but

it said that its pre-tax losses had

widened to £549 million last year from

£100 million in 2020.

Its shares rose by 3.5 per cent, or ten

cents, to $2.98 after it revealed that its

revenues had more than quadrupled

from £162 million to £668 million last

year. The company expanded beyond

Britain into France and Germany in the

last quarter and is entering the Spanish

and Italian markets this year.

Cazoo, which was launched in late

2019, buys second-hand cars, re-

conditions them and ships them to the

buyer’s home. The company has more

than 3,500 staff and is led by Alex

Chesterman, its founder, who pre-

viously launched Zoopla, the digital

property marketplace, and co-founded

LoveFilm, the postal DVD service.

Its blank-cheque listing in the United

States last August was the biggest debut

of a British company on Wall Street, but

the shares fell into reverse and have

more than halved in value this year. It

has a market worth of about $2 billion.

The company attributed an

expansion in losses last year in part to

an expensive move to start refurbishing

vehicles itself in Britain, having previ-

ously outsourced such work. This has

been pitched as short-term pain for

long-term gain.

It also disclosed a non-cash charge of

£241 million linked to its merger with

Ajax I, a special purpose acquisition

company. Such vehicles raise money

from investors through initial public

offerings before listing their shares on a

stock exchange. Then they search for

an acquisition, typically a private com-

pany. If a deal is struck, the Spac takes its

target public by absorbing it and its in-

vestors take a slice of the new company.

Chesterman, 52, said that Cazoo’s

rapid expansion had allowed it to build

towards profitability. “During 2021 we

made some important strategic

progress, creating further moats

around our business,” he said, adding

that in addition to bringing vehicle re-

conditioning in-house it had launched

a car-buying channel in which it

sourced “a substantial proportion of

our vehicles directly from consumers”.