At the end of August, Theresa May set out her plan to tackle executive pay and reform boardroom culture. While there seems to have been some progress around wage transparency, it is clear that the reforms do not go anywhere near as far as she had previously indicated.
“Binding annual votes by shareholders on executive pay have bitten the dust. Now the City’s self-regulatory code will require companies only to publish the pay ratio between CEOs and their workforce average. Plans to put employee representatives on company boards have been abandoned [in exchange for] appointment of a non-executive director ‘to represent employees’.”
The TUC’s Frances O’Grady also criticised May’s “feeble plans”.
May’s watering down might be slightly easier to stomach if highly paid bosses weren’t carrying on as usual, rewarding themselves even when their businesses are struggling.
A notable recent example is that of Martin Baggs, who was in charge of Thames Water when it was fined £20m for venting 4.2bn litres of raw sewage into our rivers between 2012 and 2013. According the FT, he “received a rise of 60% in 2015, taking his pay to £2m”…despite “evidence of negligence in its operations that a judge to brand he companies actions ‘borderline’ deliberate’”. (This comes soon alongside the revelation that Australian investment bank Macquarie left Thames Water with an extra £2bn debt.)
Then of course there were the five FTSE fat-cats who paid themselves astronomical sums, despite their shareholders complaining about their share price.
Many people – particularly those heavily indebted English students who are paying £1000 an hour for tuition – will view university vice chancellor pay in the same bracket, particularly given recent news about the expensive university-funded homes they seem to inhabit. As Sonia Sodha has written, vice chancellors should not be allowed to use the global market place as an excuse for their pay and to side-step questions about whether student fees are value for money.
Unfortunately it looks as if the current government lacks the will power to curb such excesses.
The English Labour Network will be pushing for an economy that works for the common good and will support debates about how best we can achieve this. Last week’s new IPPR report was a promising step in the right direction – you can read the summary here.