RAPID RESPONSES
Meaningless means
Steve Tatton suggests [The pay agenda, yesterday] that coverage of the executive pay debate should be focused on facts rather than personal agendas. We agree, and Manifest and MM&K have focused their commentary on why the presentation of remuneration data using means of percentage changes is practically meaningless.
Significant changes in the UK’s regulatory environment need to be based on well-presented analysis.
The distribution of executive pay in the UK is not symmetrical; there is a significant skew towards a few directors at the top end of the FTSE 100. Best practice is therefore to consider the median because the mean average is very sensitive to outliers, the abnormally low or high values. Presenting data showing the mean average of percentage changes is especially misguided. Percentage decreases are limited to 100 per cent; percentage increases are unlimited.
The median is not just less sensitive to data extremes, it is also less prone to hyping. Which is why both the UK’s Office for National Statistics and the US Census Bureau use the median to assess income data.
I will leave you with this thought: 10 middle-class, middle-earning folks are sitting in a bar. Warren Buffett walks in, and suddenly everyone in the bar is a multi-millionaire, on average.
Sarah Wilson, chief executive, Manifest