On boardroom pay, chief executives just don't get it
We're told we're in a new age of austerity, yet top pay and bonuses still rise astronomically – heedless of public disgust
o Deborah Hargreaves
o guardian.co.uk, Friday 11 June 2010 12.00 BST
The new age of austerity means "we're all in this together," according to David Cameron. But has no one told Britain's bosses yet?
Boardroom pay continues to ratchet up even for companies with lacklustre performance. Stuart Rose, Marks and Spencer's outgoing chief executive, saw a 140% increase in his rewards for last year – even though profits were only up by 5%.
While most employees have seen their salaries frozen or even cut, those at the top continue to reap the lion's share of the benefits. The ratio between the salaries of the boardroom and the shop floor has doubled in the past 10 years. Chief executives of Britain's largest companies now receive 81 times the rewards of their employees. Even where companies are in trouble or posting a loss, executives manage to justify a boost to their income.
It is hard to follow the justification offered in many cases. It usually focuses on "benchmarking" others in the same industry. That industry is almost always global and the bosses to imitate are usually in America. Leaving aside the rarity of a British exec crossing the Atlantic and making a go of it, remuneration committees always use the comparison argument as a reason for raising executive pay, never for cutting it. There must be some companies out there in the same sector who pay their bosses less, but they are never mentioned.
This makes executive salaries a giant merry-go-round of pay increases. Not just pay, but also the offer of gold-plated pensions, housing allowances and generous expenses. Maybe Britain's bosses just do not care that they stand out as greedy and grasping to fill their own pockets. Maybe they think they are worth it.
But there is a serious issue at stake. The vast gulf in salaries and wealth has led to an unprecedented wave of distrust for business among the British public. And it's not just us. UK companies are not covering themselves in glory on the world stage right now.
BP's boss Tony Hayward has become a hate figure in the US and the Pru's foray into Asia has turned into a debacle. Our companies are not enhancing their reputations worldwide – and if we don't trust them, who will?
This also comes at a time when the employers' organisation, the CBI, has started special pleading for rich people to be let off the increase in capital gains tax and for the top rate of income tax to be reduced back to 40%. Do they just not get it?
We are entering a period of extended belt-tightening in this country where many people will end up losing their jobs and those that don't could see their purchasing power eroded by a rise in inflation and a freeze in pay. For company bosses to be lining their pockets with wads of cash is the height of selfishness. Cameron has suggested that top people in the public sector should not be paid more than 20 times the average wage in their business. It is about time this was introduced for the private sector, too.
On boardroom pay, chief executives just don't get it | Deborah Hargreaves | Comment is free | guardian.co.uk
On boardroom pay, chief executives just don't get it
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