Traditional triumph in the board room

It seems that top executive pay in Britain rose by 11% last year, while on average pay packets rose by only 1.7%. That 1.7% is a pay cut in real terms since it isn’t enough to cover inflation.

In 2016 it would have taken a worker on the median wage 157 years to earn as much as a top executive would pick up in a year. There has been progress since those dark days, however. In 2017 the figure had risen to 163 years.

It’s not for me to suggest that a top director isn’t worth 163 times any ordinary person. So I’ll leave it to someone much closer to all these matters. The Guardian quoted Andrew Ninian from the Investment Association, a body representing Fund Managers, not generally amongst the lowest paid themselves:

Investors have repeatedly highlighted their concerns with excessive CEO pay, so it is frustrating that the message does not appear to be getting through to some FTSE 100 boardrooms. This year we have seen more FTSE 100 companies get significant votes against their remuneration reports than in previous years.

So even though shareholders have been voting against these colossal increases, they go through anyway.

If shareholders can’t stop them and executives, who benefit from them, won’t, then who could? 

Government maybe.

Sadly, though Theresa May spoke out loudly for executive pay moderation while she was campaigning for election, she’s been back-pedalling hard ever since becoming PM again. She has, for instance, dropped the proposal to put worker representatives on boards.

So there’s no prospect of any slowing in the drive for ever-higher boardroom pay any time soon. Something that people who backed Brexit ought to think about. You wanted control brought back home? Just look who you’re handing it to.

Not that there’s anything new about any of this. Following my mother’s recent death, I have a huge quantity of photos and correspondence to go through, and even a few books (we gave most away but I kept some). One was a collection of cartoons by the American Peter Arno from the 1940s. I happened to be glancing through it today and came across this one.

‘The motion has been made and seconded that we give
ourselves a raise in salary. All those in favour say “Aye”.’

It seems that the triumph of the board room is by no means unique to our times or indeed to Britain. A tradition honoured by time, you might say.

After all, there’s very little else to honour it, is there?

Lies, damned lies, and Tory pledges

The French have a saying, that the only person committed by a verbal contract is the one who believes it.

The same could be said of other apparent commitments. Brexit pledges for future prosperity, for instance. Or, indeed, Conservative election promises.

A glowing example of the latter is in Theresa May’s claim, in the Conservative election manifesto at the 2017 General Election in Britain, that she would deliver:

Fairer corporate governance, built on new rules for takeovers, executive pay and worker representation on company boards.

Top executives at play work

A steadily growing abuse of recent years is the shameless increase in corporate executive pay while others are on stagnant incomes at best. While there was a reduction in top pay in Britain between 2015 and 2016, that still left CEOs in the top companies on 129 times as much as the average for their workforce. Twenty years the ratio was 48 to 1. That was bad enough, but the ratio today is eye watering.

Anyone who believes the top CEOs are working nearly three times as hard as their counterparts twenty years should probably stop reading this piece now.

Equally, anyone who thinks they’re worth the same as 129 of their staff has an inflated assessment of the job of a CEO. Generally, it consists of making a lot of money whether or not the company is doing well and, when it gets into trouble, leaving with a colossal payoff before stepping into another only slightly less grossly overpaid job.

The employees on 1/129 of his income will find themselves paid a few weeks’, or if they’re lucky a few months’, salary and then battle to get another job. Homes and families may well be sacrificed in the process.

The actual proposals that have now been made by Theresa May’s government are somewhat less ambitious than her initial words suggest.

Companies will be urged to appoint employee directors or advisory groups advising their boards. They will not be mandated to do so.

As for the gaping disparities in pay, the 900 biggest companies will be required to publish the ratio of top incomes to the average of the employees. This presumably is intended to “name and shame” the worst offenders. Sadly, I rather expect it to have the opposite effect.

For some time, police used Anti-Social Behaviour Orders against young people who routinely behaved badly. These days, “ASBOs” have been replaced by injunctions. One of the problems with these measures, is that they’ve come to be regarded by their recipients as badges of honour: you haven’t made it as a full-blown hooligan unless you have your injunction.

Can you imagine the conversations between leading CEOs on golf courses after the May proposals are enacted?

“We’ve had to publish our salary ratios,” says Gunther, “mine’s 135:1”.

“Really?” says Paul, “mine’s 151:1.”

“Wow,” replies Gunther, “I’ve got my work cut out for me.”

“You can say that again. I plan to push on to 170:1 by next year,” says Paul as he drives his ball off the tee into the bushes on the right of the fairway, “you’d better get moving.”

Oh, well. Such is life. Just further proof of the principle I started off with:

If you’re disappointed over a Tory promise, you have only youself to blame – for having believed it in the first place.