When it comes to high pay in the corporate world, one of the most popular mantras is that we shouldn’t reward failure. This comment is so blindingly obvious that one wonders why anyone would bother saying it.  But why are we rewarding failure and how do we stop it?

Vince Cable, the UK Business Secretary, last month told the Liberal Democrat conference that he was no longer prepared to accept “pay-outs for failure”. Now the Association of British Insurers, whose members own more than 12 per cent of the UK stock market, said in a report that its members should “strongly resist any payment for failure.”

In his response to Cable’s speech, John Cridland, the CBI Director-General, quickly got to the core of the matter. “Payment for failure is unacceptable, but it must be recognised that the jobs market for senior company executives is one where talent competes globally.”

No company sets out to reward failure. They end up doing so as a direct result of the talent ideology, discussed in depth in my book “Pay Check”. The skills of a chief executive are deemed to be extremely rare. Therefore, when someone is offered the job of a chief executive, it stands to reason that they are thought to possess these extremely rare skills. As such, they are in an all-powerful negotiating position, and can demand a huge salary and a contract that provides for a substantial parachute payment in the event that the company later decides to part with their services.

A lot of hot air is talked about this issue, but to no avail. Reward for failure will persist in a free market until the talent ideology is properly challenged.