Quality | 2009.12.24
Reining in executive pay | Michael Meacher
The top pay commission is a paper tiger and offers no real solution to runaway executive salaries. More force is needed
The House of Commons public administration select committee has just called for a top pay commission as a solution to the outrage of runaway pay at the top. It would certainly help, but it\'s no solution. That\'s partly because the recommendation applies only to the public sector when the really outrageous excesses apply in the private sector . But it\'s also because the proposed commission has no ultimate sanctions. It would monitor pay trends and set reasonable top pay guidelines, naming and shaming those guilty of egregious breaches. Clearly a paper tiger is not enough.
Above all, this idea won\'t offer an adequate solution because it doesn\'t get to the real heart of the problem, which lies in the asymmetric framework by which pay is determined across the classes. Pay at the bottom is fixed by benefit levels and the national minimum wage. For manual work it is settled largely by collective bargaining, for white-collar workers mainly by individual pay contracts whose generosity rises sharply at the higher levels, and for the elite virtually self-awarded through private discussion with hand-picked mutually serving remuneration committees.
At the top, executives get away with it because they can, not because there is any underlying comparative rationale that justifies their extravagant income and wealth. The fact that, according to Income Data Services , the incomes of Middle England (now averaging about £425 gross a week) have risen over the last decade by some 55%, while the incomes of the top tenth who started from a much higher base have risen by 100% and the very top percentile by nearly 1,000%, makes crystal clear that remuneration increases at the top have little or nothing to do with reason. They reflect greed plus the capacity to secure it through private cabals within a tiny mutually self-serving elite. That is what, in only 20 years, has accelerated the pay of chief executives today to some £32,000 a week, a rise in the multiple over the pay of the average worker from 15 to 75 now. A top pay commission will scarcely scratch the surface of such ingrained hard-nosed avarice. It requires much more effective constraints.
What might those sanctions be? There are various alternatives. One is to give the commission the right to strike down exorbitant and unjustified remuneration packages that grossly exceed the guidelines. Or if that were seen as too direct a form of bureaucratic interference, the government could use its taxation powers to claw back most or all of what the commission, stating its reasons publicly, assessed as unjustified excess. But perhaps the best alternative would be to require all companies with more than (say) 200 employees to set up an enterprise committee comprising representatives of all the main grades of employment throughout the company. It would then be required to meet at least once a year, but preferably quarterly, and at those meetings a breakdown of the company\'s accounts and financial progress over the previous period would be presented and debated.
At least once a year, once all the corporate expenditures (depreciation, investment, etc) had been presented and explored, there would be a round-table discussion of the total remaining over for pay increases for all sections of the workforce from the bottom to the boardroom at the top. Each main group would present its own case for a rise and the reasons to justify it, and be subject to cross-questioning by other groups. In conjunction with the commission\'s guidelines, that would provide a far more significant force for pay moderation at all levels, particularly at the top, than mere quango exhortation.
For more information, please visit
http://www.guardian.co.uk/commentisfree/[...]-commission-executive-salaries
