Many of you will have seen the reports in March of the Co-operative Group’s significantly increased salary and bonus payments to its senior staff – with Euan Sutherland, the group’s new chief executive, set to receive a remuneration package of around £3m. Part of the justification provided was that the group must pay higher salaries to attract and retain the best staff – to help the group recover from its current woes. But do desperate times call for desperate pay measures?

The answer to whether the Co-operative should offer increased pay and bonus awards to senior staff is far from easy. Certainly the group’s employees have a right to be angry, especially as some are facing redundancy due to the sale of their subsidiaries. Equally the brightest and hardest working senior staff might be put off by relatively low salaries – choosing instead to work for the competition thus resulting in a deepening of the group’s problems.

Personally I am not convinced that high salaries or bonuses are necessary to attract the best senior staff; neither do they guarantee that these individuals will be able to rescue a group like the Co-operative. As we learned from the financial crisis, good decision making and high salaries do not necessarily go hand in hand. Highly remunerated bank executives not only steered some of their firms into insolvency or takeovers, but also proved seemingly unable to respond to the unfolding crisis. More recent trading scandals also show that many senior banking staff have failed to learn their lessons.

Neither is it the case that the highest paid workers are necessarily the most motivated. As highlighted in the famous Edward Deci ‘Soma Cube’ experiment, well rewarded teams produced fewer solutions and we less engaged than those completing the problems for free. And in medicine, policing, social work and teaching, all of these professions attract top quality staff, many of whom are experts in crisis decision making, for relatively low levels of pay.

So the jury is out. It will be some time before we can determine whether the Co-operative’s ‘investment’ in higher salaries for senior staff will pay off, or if will it attract self-serving individualists who may only hasten its demise.

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