High executive pay is ‘corrosive’ says report
The High Pay Commission reports today, with some eye-popping statistics.
It points out that while the pay of Barclays CEO grew by nearly 5,000% in 30 years, average wages only rose by 300%.
Lloyds Bank CEO pay increased by 3,141.6% to £2,572,000 over 30 years. The wager differential between the top and average wage at Lloyds was 13.6 times in 1980; it’s now 75 times.
So, what is to be done?
They make these recommendations:
• Greater transparency in the calculation of executive pay to end the “closed shop” on pay decisions. At present, many people do not understand until it is too late how a vast salary – often composed of as many as seven different elements – is worked out.
• Putting employees on remuneration committees, a move included in the government’s own consultation remit.
• Publishing the top 10 executive pay packages outside the boardroom.
• Forcing companies to publish a pay ratio between the highest paid executive and the company median.
• Requiring companies to reveal total pay earned by the boardroom members.
• Establishing a new national body to monitor high pay.
Most of these are look to be around transparency however, none around corporate governance. Perhaps the full report has more.
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Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments
Who pays this money? Shareholders of the companies.
I somehow doubt they would spend it on a library in Bradford or housing in Peckham if they didn’t pay it out to their directors and managers.
The problem is not what someone does with his private wealth, the problem is that it doesn’t seem to be taxed enough.
At the remuneration committee, Scenario 1
“Oh gosh, thank you M/s Smith, you’re quite right, we’d totally forgotten about low earnings by people like you lower down the pile. Funny thing that. So now we’ll scrap our usual rubber-stamping exercise and set about some serious redistribution. Everybody agreed? Thank you, chaps.”
At the remuneration committee, Scenario 2
“Awfully sorry, M/s Smith, you seem to have been outvoted 11-1, so it’s top management snouts in the trough as usual.
What’s that, what does that tell your people? To eff off, I’d say, wouldn’t you ?”
Go figure which is more likely unless the worker representative comes equipped with a veto.
It points out that while the pay of Barclays CEO grew by nearly 5,000% in 30 years, average wages only rose by 300%.
Barclays is a vastly different organisation now than it was thirty years ago. It is not a medium sized British bank with ties to the Commonwealth and a foothold in California. It is a global multinational.
As such you would expect its CEO to be paid more than a provincial bank manager.
[3] The point is that these salaries are not determined by market forces as described in economics texts. The laws of supply and demand don’t operate.
Hint: people are naturally greedy.
Another hint: under what circumstances did Adam Smith say that “the conversation naturally turns to a conspiracy against the public”?
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