Mail Online By Clare Foges For The Daily Mail
When the elderly shareholder stood up at Barclays annual meeting a couple of years ago and called the bank’s top brass ‘greedy b******s’, she was merely expressing what many people had felt for a very long time.
Over the past 15 years or so, we have witnessed astonishing corporate greed.
There was, for example, the outrage over the U.S. executive with HSBC who was receiving more for his annual dental care than a cleaner in the bank’s City headquarters was given in annual salary.
Talk about a kick in the teeth!
Remember, too, the aptly-named Barclays boss Bob Diamond, whose perks included a £5.7 million contribution towards his U.S. tax bill.
Then there was former Burberry chief Angela Ahrendts, whose total pay of almost £17 million was topped up with a £25,000 clothing allowance.
This corporate greed is not limited to a few one-offs: the fact is that there is an epidemic of excess at the top.
This week, the High Pay Centre, a think-tank that tracks executive pay, revealed that the average pay of chiefs in the FTSE 100 index rose to almost £5 million last year —183 times the pay of the average UK worker.
Inexorably, the gap between the shopfloor and the boardroom has got wider and wider. While workers have had to put up with minimal pay increases, or even freezes, over the past four years, the FTSE 100 bosses have seen their take-home pay rise by an average of £800,000.
Over the past 15 years or so, we have witnessed astonishing corporate greed, such as the aptly-named Barclays boss Bob Diamond, whose perks included a £5.7 million contribution towards his U.S. tax bill
It was not always thus. In the late-Nineties, chief executives took home more sensible packages of about £1 million a year, which was typically 60 times the UK average. Now, basic pay, bonuses, pension benefits and share options can add up to sums greater than the Gross Domestic Product of some small Polynesian countries.
Last year, according to the High Pay Centre, advertising and marketing boss Martin Sorrell took home £43 million —1,168 times the average salary of his employees. Naturally, those on the gravy train claim that they are simply being rewarded for success; that if British industry wants the creme de la creme of executive talent, they have got to be well remunerated.
There is a not-so-subtle threat that these titans of industry will flee our shores if they are not paid phone number-sized salaries, leaving Britain all the poorer. ‘Don’t kill the geese that lay the golden eggs!’ they warn.
Countless studies show there is little relationship between the rise in these salaries and actual achievement. Since 2000, the total earnings for FTSE 350 directors has soared by nearly five times the rate of shareholder returns.
And what about the threat that if they were not paid these sums, they would pack their Louis Vuitton cases and go abroad, leaving a dearth of talent in the UK?
Again, the facts make a mockery of this. Of the world’s 500 biggest firms, about five poached their chief executive from an international rival.
The truth is that if executive pay looks like a stitch-up and smells like a stitch-up, then it probably is a stitch-up.
Most of these people do not live in the real world. Indeed, bosses’ pay is decided by remuneration committees (‘remcoms’), themselves drawn from the rarefied high pay world.
The average annual pay for a remcom member is about £450,000. What’s more, people tend to sit on each other’s remcoms, so there is an incestuous merry-go-round in which no one questions the culture of ever-higher pay because they all benefit from that culture.
All aboard the Bisto Express!
You might wonder why this matters. After all, a million pounds here or there is small change to a company turning over several billion. But this growing Grand Canyon between the boss class and the rest is poisonous to the reputation of capitalism.
Rocketing executive pay goes right to the heart of the inequality debate. Most people in Britain are quiet believers in capitalism as being generally A Good Thing. We understand that business makes the cogs of the economy turn; we want to see the bright and the talented get ahead and be rightly rewarded for their efforts.
However, every headline about fat cats’ massive bonuses and corporate greed, particularly after so many in the City have been shamefully unapologetic about their part in creating the worst financial crisis for a century, sorely tests that belief in capitalism.
Where it looks like there are cosy corporate cabals stitching things up to reward the already very rich; when the gap between the suits and the check-out girls, warehousemen and drivers they employ stretches to breaking point, then we all recognise it as being morally wrong.
Unsurprisingly, it makes us angry. Indeed, such anger may be one reason for Jeremy Corbyn’s remarkable progress in the Labour leadership election.
The veteran socialist’s dreams of creating Cuba in the North Sea may be absurd. He may not seem to grasp that it is only as a result of wealth creation that every state-funded doctor, nurse, teacher and police officer is paid for.
Then there was former Burberry chief Angela Ahrendts, whose total pay of almost £17 million was topped up with a £25,000 clothing allowance
But his cries of social injustice do chime with a growing public mood.
Not all of those flocking to Corbyn’s red flag can be hard-left Marxists and agitators with nose rings. Some may simply be those who, in a moderate, British way, are profoundly concerned about growing inequality and its effect on our nation.
So, what is the answer?
The public conception is that shareholders can keep companies to account, particularly with regard to executive pay.
However, the typical shareholder is not, as we might fondly imagine, a retiree from Tunbridge Wells in a tweed jacket, buying a return ticket up to town for the company’s annual general meeting ready to tell the truth to shareholders and to glory in a heartening show of democratic capitalism.
In reality, most votes in AGMs are owned by large institutions such as pension funds and foreign investors who wave through controversial votes on pay packages.
As Catherine Howarth, head of the campaign group Share Action, says: ‘Putting executive pay to the vote sounds wonderfully democratic until you realise that most of the voting is undertaken on behalf of pension savers by asset management firms where outlandish pay deals are an entirely normal feature of life.
‘Policy-makers have put foxes in charge of the henhouse, and the result, year after year, is quite predictable.’
A few years ago, there was a brief and hopeful revolt (the ‘Shareholder Spring’ of 2012), when the worm turned and some shareholders voted down pay packages.
The Coalition Government was spurred into action and tried to help with reforms, promising to hold companies to account for lavish pay and to give shareholders more rights. Sadly the Shareholder Spring fizzled out into a Shareholder Winter.
So executive pay continues to head into the stratosphere, with little connection to what is happening down here on Planet Earth.
For its part, the High Pay Centre suggests that soaring executive pay could be curbed by putting workers on remuneration committees.
The think-tank’s Luke Hildyard says that instead of ‘stuffing them full of bankers and business leaders, who have a vested interest in driving up the going rate for executives’, they could include a more diverse range of people.
Other suggestions include forcing companies to publish the difference in pay between the bottom and the top. But I offer a truly revolutionary thought: how about the bosses make the first step and rein in pay, demonstrating some responsibility to their workforce and the world beyond?
Such restraint would be in companies’ interests.
Otherwise, people will start to think that problems of inequality have only socialist solutions — and, as a result, the cries of Jeremy Corbyn’s anti-capitalist crew will merely get louder and louder.