Quality | 2009.12.22
In Cedric's gilded universe, shame has another meaning | Jenni Russell
The mid-90s marked the moment when the concept of a reasonable salary vanished as status became all-consuming
The last time the country was convulsed by indignation about the unjustified rewards of a small class of very wealthy people was the spring of 1995. It had just been revealed that the bosses of the newly privatised utility companies had seen their salaries rocket since their transfer out of the state sector. Their pay hadn\'t doubled, or trebled; in some cases it had increased almost tenfold. Yet the jobs they were doing were fundamentally the same.
The public felt tricked, and the media reflected the general outrage. Everyone could see these executives had done nothing remarkable to justify their spectacular good fortune. Worse still we, the captive utility customers, were now the helpless funders of these huge salaries.
The focus of the fury was Cedric Brown , the boss of British Gas . The chief executive\'s salary had risen by 900% in the years since the industry was privatised, and he now earned five times more than the prime minister. He was labelled Cedric the Pig. What everyone wanted to know was how the pigs at the trough could be restrained.
Howard Davies, the departing director general of the CBI (who was about to move to the Bank of England), had an answer. He caused a sensation by agreeing publicly that the fat cats, including many other chief executives, were overpaid. He didn\'t, however, think cuts could or should be enforced: a combination of transparency and public embarrassment would provide the solution. New rules were being brought in to force boards to declare executive salaries. The remuneration committees which decided pay would be so conscious of the bad publicity excessive rewards might attract that it would act as an automatic constraint.
Essentially Davies expected shame to achieve something that the government couldn\'t work out how to impose. Unfortunately he was making the same mistake that Brown, Darling and Harman do when they attack bankers\' bonuses as unacceptable, and appeal to a general sense of what is fair. Shame is felt only by those who share the same set of values. It has no effect on those who operate by a different set of rules. It turned out that chief executives were indeed ashamed – but of earning too little, not too much.
A senior City figure says that the mid-90s marked the moment when the concept of a reasonable salary disappeared, in an explosive competition for status. The disclosure regulations made things worse, as executives and financiers demanded to keep ahead of one another. The money cascading into the City as the global economy expanded was like petrol on a fire. With deals making millions and billions, suddenly there seemed no good reason for anyone to restrain their wage demands. Traders, managers and bankers slipped the bonds that tethered the rest of us to reality, and entered their own gilded universe, where the only reactions that mattered were the sneers or envy of their peers.
The City\'s sense of self-justification was fuelled by the fact that in other sectors those at the very top were reaping extraordinary rewards. The power of global marketing turned talented people like JK Rowling and David Beckham into multimillionaire superstars, in a way that had never been possible for CS Lewis or Stanley Matthews. Computer geniuses became billionaires in two or three years. The boss of Formula One became one of the richest people in the country. As everyone began cross-referencing their incomes, and found them wanting, those in a position to bargain demanded more to catch up.
The ratcheting-up of top pay dragged every sector along in its wake. Companies told one another that they couldn\'t have all the best people going into the City, and raised their rates accordingly. The BBC agreed that a news presenter was worth a million a year, and an entertainment presenter six million. Even in the public sector and the charity world, fat six-figure salaries for chief executives became the norm.
No one could escape the consequences of this explosion. Even if some strong-minded individuals managed not to feel diminished by their own fall in relative status, the practical effects, like the bidding-up of house prices, couldn\'t be ignored. And yet the message from the Labour government was that great wealth didn\'t matter; that the City must be courted and the rich given tax breaks; and that we were lucky to have such income generators in our midst.
That praise and that freedom has created a deep sense of entitlement and superiority among the privileged, and it\'s why the government\'s belated and abrupt conversion to the idea that this degree of inequality is wrong – and should be addressed – will have no purchase at all on that audience. They don\'t care what we think. They long ago lost any sense of connection with ordinary people, and why would they not?
Cultures are shaped by the stories they tell themselves. Labour went in for some quiet redistribution of wealth, but throughout the boom it was too timid to make a case for why we might prefer to live differently. The story we heard was that the rich deserved what they had. The reality we saw was that to be richer was to be stronger and safer. The corrosive consequences of that on all of us is not something that can be reversed with a couple of tax rises and a bit of banker-bashing. As we tumble further into recession and insecurity, Labour\'s legacy is that the people who are ashamed of the growing inequality of their incomes are not the wealthy, but those left trailing in their wake.
For more information, please visit
http://www.guardian.co.uk/commentisfree/[...]4/bankers-pay-financial-crisis
