Our hard earned money in savings, life insurance policies, or pensions are being invested in shares in the very companies that are paying scandalous salaries to the greedy few. It is time for those charged with investing our money on our behalf used their muscle as major shareholders in Britain’s biggest companies to call for Fair Pay.
Yesterday’s publication of the High Pay Commission report finally blew the gaff on top pay: It is out of control; out of any relation to performance; unjust and unsustainable. Its message was clear: It is time for Fair Pay – at all levels in business and society more generally. As the BBC reported it “The high salaries of UK executives are ‘corrosive’ to the economy.”
Deborah Hargreaves, chair of the Commission writes in the foreword: “As Britain enters times of unparalleled austerity, one tiny section of society has been insulated from the downturn. That is the top 0.1% of earners, with company directors in particular continuing to enjoy a huge annual uplift in rewards.”
Even the Daily Telegraph conceded the case that, on average, the chief executive of a FTSE 100 company is paid 145 times the salary of the average worker; and within 10 years, on current trends, that multiple will rise to 215.
Most of us probably feel that the world of high finance and executive remuneration packages are a world apart from us. In many ways they are. But for those of us with savings or pensions, they are less far away than we might imagine. Its time for us to ask how those of us charged with investing our money on our behalf are using their muscle as major shareholders in many of Britain’s biggest companies to call for Fair Pay.
High Pay: It’s a hard life if you can get it…
Its hard work if you can get it, being a director of one of Britain’s top 100 companies. The average Chief Executive of a FTSE 100 company is estimated to take home around £4.2 million. And many of them are, indeed, pretty average.
Yet, despite the less than average performance of the British economy over the past couple of years, executive pay in the FTSE 100 rose on average by 49% (compared with just 2.7% for the average worker). In fact, the High Pay Commission found no evidence that there is any connection between executive pay and the performance of the companies they run.
Over the past thirty years, there has been a dramatic shift in incomes – with pay at the top racing away from the rest of society, and indeed, racing away from the bulk of workers even in their own companies.
- In 1979, the top 0.1% took home 1.3% of national income. By 2007, this had grown sixfold to 6.5%.
- In 1979, Barclays director earned £87,323, around 14 times the average Barclays employee. By 2009, Barclays director was earning £4.4 million (a 4,900% increase), around 75 times the average Barclays employee.
If this trend continues unchecked it will take us back to Victorian levels of pay inequality in less than 30 years.
As a corporate pension fund manager from Aviva said at the launch event last night, “Every time an executive remuneration package changes, it changes in one directly only.” Not only that, but most of the ‘performance related’ pay packages are rigged to pay out however the company performs. As the man from Aviva says “Even mediocrity pays double.”
Together we can tackle High Pay
But the High Pay Commission was not all doom and gloom in its final report. It has identified twelve key recommendations for tackling High Pay, and equally importantly (apparently) has the ‘ear’ of Business Secretary, Vince Cable.
But please, don’t leave it all up to nice Mr Cable.
Time for shareholder activism: You too can play your part.
It is our hard earned money in savings, life insurance policies, or pensions, which are being invested in shares in the very companies that are paying scandalous salaries to the greedy few. It is time we started to exercise the power this gives us as investors and shareholders. Pension Fund managers, invest huge sums in companies on our behalf, and carry considerable clout as a result. Some chose to use this power to vote against excessive high pay at company AGMs. Others do not.
So which way does your pension company vote? For scandalously high pay, or against it?
Have you asked recently how your Pension Fund manager is voting on your behalf? As the man from Aviva said, “the most effective pressure on Pension Fund managers is contact from customers.”
So give it a go. Dig out the details of who manages your pension (if you’re lucky enough to have one) – and write to them – or better still, give them a ring! Tell them to read and take on board the report of the High Pay Commission. And tell them that, in future, you’ll be expecting them to vote for Fair Pay.
Fairness is a concept close to the heart of the British people and it is essential that we now redress the balance.
Together we can!