From the letter’s page of this morning’s Guardian:
The crisis we find ourselves in is one significantly caused by greed. The salaries of those at the top raced away while the median wage stagnated. Inequality grew, and an economic crisis ensued. The unjust rewards of a few hundred "masters of the universe" exacerbated the risks we were all exposed to many times over. Banking and executive remuneration packages have reached excessive levels. We believe now is the time for government to take decisive action.
The facts speak loud and clear: an employee working a 40-hour week earning the minimum wage would have to work for around 226 years to receive the same remuneration as a FTSE-100 CEO does in just one year. Remuneration and performance pay cycles are too short; rewards for failure are too great, to the detriment of the long-term future of these companies and the wider economy. The government must now take decisive action on excessive pay at the top when it has had such a damaging and corrosive effect on the real economy and wider society.
In 1997 a Low Pay Commission was set up to advise on the implementation of the minimum wage — a policy which has ensured greater fairness and economic stability. We need a High Pay Commission to launch a wide-ranging review of pay at the top. It should consider proposals to restrict excessive remuneration such as maximum wage ratios and bonus taxation to provide the just society and sustainable economy we all want.
Furthermore, we also need the government to take the moral lead by setting reasonable pay structures within our public bodies, for public procurement contracts and last but not least — within our publicly owned banks. We therefore urge the government to create a High Pay Commission to come up with concrete solutions and instigate the real change that will ensure a more sustainable, equal and secure economic future for all.
I was one of 84 signatories.
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It’s time that ordinary workers, via their trade unions, had a significant role in determining the pay of those at the top of their organisations. After all, they are the ones who create the value to be distributed in the first place.
So the “excessive” profits should go to the shareholders instead of the Executives… is that what you mean?
Why do you not concentrate on increasing competition in the financial area which will wipe away much of the excessiveness in the margins and still allow the banks to reward in the manner they fit appropriate¬? For instance it is a well known fact that just forcing all the derivative contracts to settle in standard forms through clearing houses would take away much of the opacity that breeds extraordinary profits from which extraordinary bonuses are paid. Honestly, I just think you are barking up the wrong tree.
And to inform Carol Wilcox many of these profits are in companies where besides the outsourced cleaning lady there has never even been an “ordinary worker”.
Per
If the profit goes to shareholders – OK
That’s pensions
Richard
[…] I blogged the call for a High Pay Commission earlier today. […]
Richard, how can you square your comment above with this:
“we can’t fund our pensions the way we do now, secondly that investing pension funds in the FTSE won’t solve the pensions problem, however much it is artificially reflated, and thirdly that the idea that the stock market has any bearing to any economic reality we want to depend upon is absurd (bar the sure fact that the City will gamble in it for their own benefit but that of no one else)”.
Carol
Easily
I’;m saying in the quote we need invest less in the City
I’m saying above that what is invested in the City already needs to pay a better rate of return
Richard
I must say that while I am philosophically opposed to most of what Richard says, I can’t really think of any objection to this one.
If a person builds up a business then its fair for him to take home whatever profits the business makes because he has put his own capital on the line and taken risks to creat wealth. But a man (because they always are)in his mid-40s being appointed to a large company? It’s hard to see why the wages of such people should have risen so exponentially over the past 20 years.
There is obviously the idea that you have to pay to attract top performers. I think the truth is much closer to the sort of ideas Nicholas Nassim Taleb wrote about in The Black Swan: that top performance is usually just the role of chance and that in any group some people will through sheer chance perform better than others, but it doesn’t support the idea they have innate excellence.
Truth is that the past 25 years have been extraordinarily benign for companies, and the benefits of the general economic environment have been misinterpreted as the manifestation of the genius of top CEOs.
It’s the same with football clubs – there is the idea that if you replace your manager you improve your performance. Surely the truth is that a club, like a company, is more than just the influence of one man. It is about continuity, communication, everyone understanding their role and committing to fulfil it: there is not a simple solution called replace the man at the top with someone on even higher wages. And I suspect that the “them and us” approach that is created by huge wage differentials is one of the most detrimental things to the performance of a company.