Saturday, October 29, 2011

Remuneration Committee "Racket"

Today I listened to Any Questions on Radio 4. There was a question about the outrageous 49% increase in the pay last year of the average FT100 director (about 10 minutes in).

Lib Dem Coalition minister Jeremy Browne
described the company remuneration committees who "set" the pay of such executives as being "a cartel... a real Racket". Tory MP David Davies also cheerfully admitted that it was all a big fiddle and stitch up. While Labour MP Rachel Reeves pointed out that it was not as if these bosses had added any value to these companies in the last year.

Despite accurately describing such pay arrangements as being akin to organised crime Browne failed to offer any solutions. Davies suggested allowing getting company AGM's to vote on individual executive pay rather than the whole executive package en bloc. This would be useful but is not going to change things.

As the TUC points out here why shouldn't there be elected employee representatives on these remuneration committees who would bring "directors a much-needed sense of reality". This seems to work in many of our European competitors such as Germany? Why in the UK is this seen as being some form of unBritish devil worship? This is the sort of dare I say radical but necessary change that Labour should pursue. It is good that Ed is on board.

Over the years I've banged about the subject here, here, here (last year's increase was 55%!), here ... (and elsewhere). Check out Tom's latest post as well.

By coincidence I have just submitted a branch motion on applying the principles of the "The Spirit Level" to company pay differentials.

Picture: Typical FT100 Remuneration Committee at work. The Chair of the Board is asking the committee if they are going to increase his pay...or sleep with the fishes. Well, something like that.


Anonymous said...

Pay should reflect the companies performace, not what director think they are worth. Some companies, just put prices up and say we increased profits. That does not required much talent.....

John Gray said...

Hi anon

yes, but surely all the workers in a company should benefit from a companies increased performance? Not just the executives?