Involved Shareholders

European CEO salaries also get a lot more scrutiny from shareholders, says Bob McCormick of the U.S. pay consulting firm Glass Lewis. In the U.K., shareholders get to vote on pay proposals. Companies don't actually have to adhere to shareholder wishes, since the votes are non-binding. But it's a "slap in the face" if there is a big vote against a remuneration report -- which can make companies leery of straying too far away from their peers in terms of pay, McCormick says.

To the victor, the spoils

Many pay analysts chalk up the huge pay packages in the United States to a winner-take-all mentality in a culture that doesn't frown on celebrities, sports stars and CEOs getting most of the marbles. "The U.S. values individualism and individual achievement," says Mel Fugate, a professor at the Southern Methodist University's Cox School of Business. "So anybody who can obtain the coveted CEO post 'deserves' to get the spoils. There is much more tolerance for income inequality in the U.S. than in Europe." In contrast, management at European companies tends to be more team oriented, with top managers sharing more of the responsibilities and the rewards, Fugate says.

The pay differences across the Atlantic can make for awkward moments at European multinationals when the head of the U.S. division of a company makes more than the CEO back home in Europe. But European CEOs put up with it because they know they need to pay U.S. managers more if they want to stay competitive. "If you are going to be in Europe, you will get paid according to the local market," says Miller at Korn/Ferry International. "If they like where they are, they are not going to move."

Unit 6 How not to annoy your customers

Jan 5th 2008

From The Economist print edition

Is in-store television an effective advertising tool? Perhaps, if done right…

IN-STORE television would seem to be a no-brainer for big retailers. It makes their shops more attractive to consumer-goods companies because they can advertise their wares direct to a captive audience. It lets retailers run their own advertisements and promotions. It keeps shoppers in­formed and entertained. And after an (ad­mittedly large) investment in the in-store network, it can be a lucrative source of ad­vertising revenue.

Even so, in-store television has so far worked well for only some retailers in some countries. America's Wal-Mart, the world's biggest retailer, started with in-store TV ten years ago in partnership with Premier Retail Networks (prn), a firm based in San Francisco that is owned by Thomson, a French technology firm. It has the world's biggest network, with screens in over 3,000 of its huge shops in America. After much trial and error it seems to have learnt how to carry it off. Some 140 firms, including Procter & Gamble (p&g) and Un­ilever, the world's biggest consumer-goods companies, pay to advertise on Wal-Mart tv. (Wal-Mart and prn split the proceeds, but will not say how.) A survey of retailers by Retail Systems Research (rsr), a consul­tancy, found that in-store tv increased overall sales by 2%.

Wal-Mart started with a single in-store channel but now has six, covering subjects such as food, electronics and health, which are shown on giant screens in a store's various departments. Since the attention span of busy shoppers is short, these chan­nels differ from ordinary television. A 30-second spot created for tv is too long, ex­cept for people stuck in check-out lines. Spots of five to 15 seconds, with one or two messages, work best. Non-stop advertising puts shoppers off, so Wal-Mart mixes ad­vertising with entertainment, weather re­ports and cooking tips. On average, cus­tomers watch one minute of programming per visit. They get annoyed if it is too loud, so Wal-Mart turns down the volume when its shops are less busy.

In Britain the in-store network being built by Tesco, the world's third-biggest re­tailer, is at an earlier stage. After launching its system to great fanfare in 2004 with JCDecaux, a French outdoor-advertising company, Tesco failed to win many ad­vertisers and almost pulled the plug on the whole project. But in 2006 it asked dunn-humby, a British marketing company, to relaunch "Tesco tv" in 100 of its super­markets, with about one-third of the chain's sales. There are now closer ties be­tween what appears on the screen and other in-store promotions. A new "brand sting" format is said to have lifted sales of some products by as much as 25%.

The greatest hope for in-store tv may be in emerging markets, where shoppers are hungrier for branded consumer goods than they are in the rich world. In Novem­ber prn said it was helping Carrefour, the world's second-largest retailer, kit out all of its hypermarkets in Brazil with in-store tv. (It has already fitted Carrefour's shops in Poland.) In China Focus Media, a local company is dotting the retail landscape with giant screens.

The business model for in-store tv va­ries. Sometimes a company such as prn pays for the screens, sells the advertising slots and pockets most of the revenue, with a cut going to the retailer; sometimes the retailer pays for the screens, gets an­other firm to run them and keeps the reve­nue for itself. In-store television networks make most sense for big retailers, says Nikki Baird of rsr, because of the cost of installing screens (typically $4,000 per shop) and updating content. Big retail chains also find it easier to attract advertis­ers, because they can promise more screens in more places.

All of this depends on the willingness of consumer-goods companies to buy ad­vertising slots, however. Though about 80% of them renew their in-store tv deals, they are still not totally sure about the idea. Paul Fox of p&g says it is too soon to judge the new medium. The company is not yet certain, he says, how in-store tv fits into the broader mix of marketing. But studies suggest that three-quarters of all decisions to buy something are made inside shops, so done the right way, in-store tv advertis­ing could, in theory, make a big difference. Stay tuned.

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