Angry about absurdly high pay? Here’s what to do about it


9:05 am - May 1st 2012

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contribution by Annie Powell

Many will find it hard to comprehend how Bob Diamond can receive a remuneration package of £17.7m when he openly concedes that Barclays has had an “unacceptable” year.

The vast majority of people from trade unionists to government ministers acknowledge that excessive executive pay has become a serious problem.

Yet institutional shareholders are still largely unwilling to vote down remuneration reports even when they reward poor executive performance.

Barclays’ AGM on Friday saw only 26.9% of shareholders vote against Diamond’s controversial report, and this is considered significant dissent.

It is clear that the government’s proposal to give shareholders a binding simple majority vote on pay will not in itself solve the problem.

FairPensions have therefore launched the Your Say on High Pay campaign to give a voice on excessive pay to those ordinary savers who own stakes in FTSE companies through their pension schemes or ISAs.

If you are a member of a pension scheme or have an ISA then you can use FairPensions’ online tool to email your pension fund or ISA provider.

The email requests that the fund or ISA provider asks their asset manager to vote against remuneration reports that contain certain unacceptable components, such as a bonus that exceeds 200% of base salary.

While pension providers are not obliged to act on members’ requests it is hard to ignore the views of those people whose money they manage, especially when those views are expressed by a large number of members.

Excessive pay damages the interests of ordinary savers not only because it diverts money away from dividends but it also creates perverse incentives – there is little financial reason for CEOs to run their companies well when they are so well rewarded for failure.

The campaign tool also allows those who do not have a pension or savings but are concerned about dramatically increasing wage inequality to sign a petition against excessive executive pay.


Annie Powell is at Fair Pensions

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Reader comments


While pension providers are not obliged to act on members’ requests ………………

I think you’ll find it’s remarkably easy to ignore people whose money they manage – they do it on a daily basis.

Sorry? Profit sharing for the staff is wrong and more money should be given to the capitalist company owners? Whose side are you on?

3. Chaise Guevara

@ 2 JC

Oh, well done. As we all know, when lefties talk about workers’ rights they’re specifically talking about those “workers” who call the shots and earn millions a year. There is LITERALLY NO DIFFERENCE between that and someone working in the same company for mimimum wage. We are all in debt to your acute political insight; what a gaping hole in left-wing logic you have exposed! Have a fucking cookie.

4. margin4error

Can I suggest something relatively easy as a means to tackle this problem – especially with regards to banks.

It is brilliantly easy to move one’s bank account, mortgage, credit card, etc away from a company that pays excessively high executive pay to to one that doesn’t.

As a simple example – anyone complaining about Bob Diamond’s ridiculous salary that banks with his bank is an utter hypocrit of the highest order and is as much to blame as the shareholders who don’t care about handing large sums to people who are not actually very good at their jobs.

Move accounts to somewhere like Nationwide – and when the bank you leave asks why – tell them!

5. Chaise Guevara

@ 4 MfE

It’s not THAT easy. Moving lending products means reapplying (and possibly being refused or getting a less affordable deal), and even in terms of normal retail banking, how many places do you have a direct debit with, or a registered card number for repeat purchases? Is anyone holding a post-dated cheque signed by you? Do you trust your employer to change your payment details on time? Banks have a system designed to move your direct debits over automatically, but when I worked for a bank I saw it go wrong sometimes – which depending on the payee can be very bad for the consumer (for a start, I’m not sure whether it’s possible to fix damage to your credit rating caused by bank error).

I’m not saying it’s impossible, but it can be hard for people with complicated finances, especially if they’re in debt. There’s a reason banks rely so heavily on consumer intertia.

6. margin4error

Chaise

OK – maybe brilliantly easy was something of an over-statement. But while errors might happen, there are systems in place for people to move from one bank to another. Likewise plenty of banks (and building societies) are very accomodating of people who want to move their mortgage provider or credit card – since those are relatively profitable products.

So while you are right that it might be a bit complicated in real life – it is do-able. And people should do it.

7. Chaise Guevara

@ 6 margin4error

Well, yeah, aside from the lending stuff my list above is mainly a rundown of convenient excuses. To which I would add that it’s nice to have access to late-night telephone banking, good online banking and cash machines outside of your building society’s home town.

I’ve got every respect for people who move banks for ethical reasons, or who make sure they open accounts with ethical providers in the first place. I just think that a bank is one of the least realistic boycott targets in the world, at least in terms of current customers moving to another firm. Banks tend to hang on to their clients right up until consumer panic kicks in and there’s a queue out the door of people trying to withdraw their life savings.

The 200% ratio should not be a bar if someone is on the wage that just qualifies him (No, Sally, it will always be a him – ladies get paid more) for pension credits. Thanks to the FSA a lot of financial services companies have a pretty minimal contractual salary, with most of a guy’s earnings deemed to be bonus – I spoke last week to one CEO who told me that anyone who wasn’t generating three times his/her base salary was on amber (red meant the sack).
Bob Diamond’s pay is ridiculous, especially the compensation for double taxation which is presumably liable to be doubly-taxed in the UK and the USA: if I had shares in Barclays I should vote against. However that should not bar a company from paying a fair wage to someone who has worked his socks off.
Better to set an absolute bar of £1 million on board salaries

9. Charlieman

@7. Chaise Guevara: “To which I would add that it’s nice to have access to late-night telephone banking, good online banking and cash machines outside of your building society’s home town.”

Add to that personal face-to-face service. If you have a steady balance, they look after you. BTW I do not use online or telephone banking; if money is taken from my account using those services, it ain’t my fault.

I do not have the time to interchange mortgage or utility deals. My bills do not justify the time. My bills are small and I value my non-work time (perhaps contradicting myself with this post).

“Banks tend to hang on to their clients right up until consumer panic kicks in and there’s a queue out the door of people trying to withdraw their life savings.”

That’s not a comprehensible argument. “Banks tend to hang on to their clients” is a truism; like magazine publishers, banks will offer great deals to stick with them. Do you mean that clients hang on to busted banks until the clients queue up outside?

For readers in London another thing you can do is visit the myfairlondon web site, sign our petition, and email the link to all your friends. The campaign is run by the London Equality Group, a self organised independent group of Londoners outraged by the growing gap between rich and poor in our city. We produced a manifesto for the Mayoral candidates to sign to commit to five simple actions if elected to start to narrow the income gap in London. Three candidates signed up to our plan. One did not.

If you like our proposals please share them with anyone who might have a vote in London on Thursday

http://www.myfairlondon.org.uk

For any Londoners out there another simple action: check out the myfairlondon web site, sign our petition, email the link to all your friends and relations and use your vote on Thursday. Three out of four of the main Mayoral candidates have signed up to our manifesto for a fairer London to take action to narrow the income gap. One hasn’t.

12. Chaise Guevara

@ 9 Charlieman

“Add to that personal face-to-face service. If you have a steady balance, they look after you.”

Yep, that too.

“I do not have the time to interchange mortgage or utility deals. My bills do not justify the time. My bills are small and I value my non-work time (perhaps contradicting myself with this post).”

Come on, commenting on the internet counts as a leisure activity.

“That’s not a comprehensible argument.”

It’s not an argument, which is probably why. I’m not trying to make a political point here; what I was saying was that customers tend not to abandon their bank en masse unless they’re scared that their money is at risk (which it isn’t). Changing bank is a pain in the neck, and it’s also probable that you become very comfortable with the one institution that you’ve stored money in for decades. People don’t casually boycott banks like they might retailers or consumer brands, for the very good reason that you don’t have an existing contract with Tesco or Nestle.

“Do you mean that clients hang on to busted banks until the clients queue up outside?”

Well, this is sort of true despite the apparent oxymoron. As we saw with Northern Rock, what really kills a bank isn’t general financial problems, it’s the reactions of customers to financial problems. Basically it seems you get some people who think they’ll lose their life savings if their bank folds, possibly because they’ve seen It’s A Wonderful Life too many times. These people turn up and demand their money when the papers report problems at the bank. Once the number of consumers reaches a certain critical mass (basically queues out of the door at several branches), the media reports it again in more hysterical terms, at which point EVERYONE panics and the banks run out of available cash.

@ PeteB
Which one is that? Boris who pays tax on his earnings or Ken who avoids paying tax on earnings of more than £300k?

@ PeteB
I am in favour of Boris paying tax at up to 60% on his earnings, as Geoffrey Howe wanted, but it would be nice if Ken actually paid at least basic rate tax on his income in excess of £100k per annum.

15. Charlieman

@11. Chaise Guevara: “Basically it seems you get some people who think they’ll lose their life savings if their bank folds, possibly because they’ve seen It’s A Wonderful Life too many times.”

Too few times, Chaise. From the film, not an economics moment:
“Dear George: Remember no man is a failure who has friends. Thanks for the wings! Love, Clarence.”

@ 4, Having just read Chaise and Charlieman
There isn’t a Nationwide branch within three hours walk and its adverts lied about having no shareholders – the preference shares had a higher yield than Lloyds or Barclays or HSBC’s ordinary shares.
@ 5 Chaise
Not only are you right, you possibly understate the problem
“for a start, I’m not sure whether it’s possible to fix damage to your credit rating caused by bank error” – it may be but it is not possible to make the guy who went overdrawn because your cheque bounced forget that.

17. Chaise Guevara

@ 15 Charlieman

Very true!

18. Chaise Guevara

@ 16 John77

Good point, and one I hadn’t considered as I don’t earn a living in such a way that I need to build that sort of reputation. I imagine that bounced cheques due to bank error can end up horribly expensive to small business owners.

Chaise Guevara. Thank you for your constructive comments. As I pointed out, we need to be consistent on these issues, otherwise we’ll be arguing at which point profit sharing should be stopped. The more complicated it becomes, the more difficult it is to manage.

Should companies share the profits out between the staff or the owners? How do you reward a salesman who brings in a deal which will generate a large amount of profit for the company? How do you reward the project manager who brings this project in under budget? It shouldn’t depend on whether we like them or not.

20. Chaise Guevara

@ 19 JC

I don’t think anyone’s saying we should get rid of profit-sharing. The complaint seems to be executives getting large sums of money (which not only could be spent elsewhere, but encourages them to continue their current behaviour) as a reward for incompetent or outright dangerous management, which can harm consumers and staff.

You’re right that it’s difficult to manage. Hindsight is always 20:20, and often news sources will link a large bonus to a single “bad” figure, while ignoring the bigger picture, in order to generate outrage. On the other hand, a lot of big companies have obviously been mismanaged, prioritising short-term profits and bonuses over stability to the detriment of staff, customers and the economy as a whole.

So there’s a debate to be had about how far the state should go in overseeing the private sector, and whether ideas like capping executive pay, delaying bonuses or making sure only X% of pay can be performance-based are productive and fair. Regardless, it’s too complex to be dealt with by a snide, straw-man comment to the effect of “OMG you’re attacking the workers!” If you can’t post constructive comments, don’t get upset when I respond in kind.

21. Peter Woodford

Watch Terminator 2 again and see what the young people of this world need to do to alter the way the world is financed. During this recession, they were the ones who stood out against greedy banks and bankers who can’t do their job. All our pensions have been raided by the financial sector to cover up their dodgy shortfalls. And what is worse,we all put up with it! Our Tanker drivers are branded as greedy when they ask for better pay and conditions,at the same time that Bankers are defended as being irreplaceable and worthy of their bonuses!
Let’s look after our own money,and stop thinking of these bods as brilliant.They cost us our future!

An encouraging note – on Wednesday a British “Investment Bank” (Westhouse) reported a £3m loss for last year so the total bonus paid to its directors was absolutely zero. I noticed a few years ago that a larger competitor did the same (except for one director whose bonus, for historic reasons, depended on the results of his little team who had done exceptionally well) when its profits *declined* year-on-year. There are still some guys with principles.
I was brought back by Peter Woodford’s stupid comment – our pensions were raided by Brown, not by the financial sector – as anyone who is willing, as well as able, to read should know.


Reactions: Twitter, blogs
  1. Liberal Conspiracy

    Angry about absurdly high pay? Here's what to do about it http://t.co/SXNQzbwi

  2. Annie Powell

    Angry about absurdly high pay? Here’s what to do about it | Liberal Conspiracy http://t.co/xeDwHQyg via @libcon

  3. leftlinks

    Liberal Conspiracy – Angry about absurdly high pay? Here’s what to do about it http://t.co/YmNebj8q

  4. Matthew Butcher

    Angry about absurdly high pay? Here’s what to do about it | Liberal Conspiracy http://t.co/k8NkNVMF via @libcon

  5. FairPensions

    Angry at absurdly high pay? Here's what to do about it: http://t.co/NZAdGNYI via @libcon #yoursayonpay #highpay

  6. Phil Evans

    Angry about absurdly high pay? Here's what to do about it http://t.co/SXNQzbwi





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