The bonus dilemma & the high street’s unexpected new friend
Should WPP pay bonuses? Is Google a friend or foe to high street retail? Dominic Mills answers the issues of the week
It seems an age ago — indeed it is if we measure time in Covid weeks — but back in April Tesco found itself in the crosshairs of public opinion for its decision to pay shareholders a £635 million dividend despite taking a £600 million business rates tax holiday as part of the government’s support for businesses.
Tesco’s argument, for which I had some sympathy, was that the dividend related to its performance the previous year and was therefore unconnected to anything to do with Covid. That time limitations get-out can no longer be used, but in any case there seems to be little dispute now around companies paying dividends.
A handful of companies have been scrupulous in their attitude to taxpayer money, paying back furlough cash. They include house-builder Barratt, Games Workshop, Dunelm and the distribution company, Bunzl. Most, thankfully, have done it quietly without loud virtue signalling, but they deserve a public pat on the back.
But as we head to year-end, another issue raises its head: the annual bonus — a big deal for many companies, and a near-universal tool in adland.
Beyond affordability, the bonus question is fraught with moral issues. What does it reward? How is it decided? Who gets it, and who doesn’t? Are they for managers and senior staff only? Or for teams? And if the organisation has played the ‘we’re-all-in-this-together’ card, as many have done, how does that sit with a non-universal bonus?
From what I know, without exception, every agency has worked very hard — and mostly successfully — to change their work practices, service clients and look after their staff.
Many leaders and individuals have gone above and beyond. Any rational person would say their efforts deserve recognition. Talent remains vital, and bonuses are about recognition, motivation and retention.
But what if those who pay bonuses have also been taking furlough money from the taxpayer and/or laid-off staff at the same time? That adds even more layers of complexity to the debate. It feels like behind-the-back sleight of hand.
Last week, Legal and General, a major institutional investor, put its cards on the table in unequivocal fashion. It declared that companies that have taken furlough money or other taxpayer support, laid off staff or cancelled or postponed a dividend should not pay executive bonuses.
So where does that leave WPP, which also last week announced that it would pay bonuses? It fails on all three counts, having taken furlough money, laid off staff and suspended (although now reinstated) a dividend.
You can’t argue with WPP’s reasoning. CFO John Rogers says it wants to reward staff for, in his words, “their significant contributions this year – not least of which in terms of managing our cost base and driving performance in a very, very difficult market.” Many staff, who have at least kept their jobs, have also taken salary cuts.
Rogers thankfully acknowledged that it would be “challenging” for he and Mark Read to take any short-term bonuses which, while not an unequivocal denial, suggests they are mindful of what would be a PR disaster.
But, looked at in the wider context (ie the real world), where there are three audiences that might have a legitimate view, it suggests a cloth ear.
One is internal where unless everyone gets a bonus (in which case it would be negligible), there will be a divide between the haves and the have-nots.
The second are the clients, some of which — and many of their staff — will be dealing with a mix of corporate and personal hell. Some will empathise, of course, but some will find it distasteful.
And the third is the taxpayer. Imagine trying to explain to your mum or a friend that, yes, millions face hardship and the loss their jobs, but ‘I’m ok, thanks very much’. That person might reasonably think ‘that’s my money’.
It’s not a good look.
Google, the high street’s unlikely new friend
In my part of suburban London, I am close to two high streets. Each is about a mile away in different directions and in different boroughs.
One, much smaller, is doing ok as far as I can tell. Mostly comprising independents and specialist shops, there is little tumbleweed.
However tough it might be, they are at least open (until Thursday at least). In the streets around, banners encourage us to shop local. A few weeks ago, the council posted leaflets through every door listing shops and their speciality.
The other, 75% occupied by chains, looks increasingly forlorn. Once a destination shopping area, every week another store closes. There is no concerted effort to promote local shopping, and the council seems content to rely on past reputation.
One difference between the two is that the former is ‘local’ — the owners and the customers all live close by — while the latter isn’t.
Into this grim landscape a new campaign from Google launched last week under the banner headline “Businesses we love”.
TV ads show celebs like Mo Gilligan, Anthony Joshua and Katie Piper singing the praises of their trusted local shops. Here’s Mo getting a beard trim in his local high street barber. Help those businesses they say, by giving them a Google review.
Aaargh. What terrible timing. The TV launched during GBBO — i.e a week before this Thursday’s shutdown comes into force and a new existential crisis beckons for anything non-essential on the high street. Bang! Bang! Into the coffin go yet more nails.
I must confess to some initial scepticism. Google has destroyed — perhaps inadvertently — the local media that were an essential part of the high street eco-system.
By making online purchasing so easy, it has favoured the likes of Amazon over local shops who will not have had the skills or the resources to build (or promote) their own online offering in anything like a remotely comparable way.
If Google’s plan to add a direct shopping facility to YouTube is successful — and therefore an effective challenge to Amazon — how will that help, for example, a small clothing retailer on the high street?
Isn’t this part of a titanic struggle with Facebook for the huge long tail of small business advertising? At best, is this just a slick PR exercise from an unfeeling multinational giant?
And yet, whether you agree with this or not, you could also argue that Google offers the high street some light, a lifeline to cling to.
Nor, let us hope, is it a here-today-gone-tomorrow effort.
It doesn’t look that way. If you search ‘Google supports the high street’ you will see that this latest effort is in fact the most recent in a series of initiatives going back at least two years.
Scepticism suspended, and let us pray that the locals can survive another month until a time when the Google campaign can actually make a difference.