Fat cat bosses get massive wage rises
1:22pm 22nd November 2011
(Updated 1:24pm 22nd November 2011)
The enormous salaries paid to the UK's top executives are "corrosive" to the economy and damage trust in British businesses, according to a report by the High Pay Commission.
The year-long inquiry found the pay of top executives had increased by more than 4,000% in the past 30 years, compared to a mere threefold increase in the average worker's salary, fuelling the gap between the highest paid 0.1% and the rest of British society.
The report, Cheques With Balances: Why Tackling High Pay Is In The National Interest, criticised "stratospheric" pay increases, which it said distorted markets, drained talent from key sectors and rewarded failure.
The study detailed the pay of former Barclays' chief executive John Varley, saying he had earned £4,365,636 - 169 times more than the average worker in Britain, and an increase of 4,899.4% since 1980, when the top pay in Barclays was just 13 times the UK average.
The chief executive in the part state-owned Lloyds Bank has seen his pay increase by 3,141.6% to £2,572,000 over the same period - 75 times the average Lloyds employee.
In 1980, the top salary in the bank was just 13.6 times that of the average Lloyds worker, said the report.
Average wages in the UK today are a 'modest' £25,900 - up from £6,474 in 1980 - a threefold increase.
The Government has indicated it may legislate on the issue with Business Secretary Vince Cable holding a consultation.
Mr Cable said he was not opposed "in principle" to people earning huge sums but he did not believe in rewarding failure.
He said the report would be taken seriously but which recommendations the coalition takes forward will depend on the outcome of the consultation.
A survey of more than 2,000 members of the public to mark the report's publication found four out of five believed pay and bonuses for top executives were out of control.
Two-thirds did not think companies could be trusted to set pay and bonuses responsibly and most wanted Government action to make firms more transparent awarding executive pay.
High Pay Commission chairman Deborah Hargreaves said: "The growing pay gap between the top 0.1% and everyone else is increasing public disillusionment, damaging trust and fuelling the view that business leaders are in it for themselves.
"There's a crisis at the top of British business and it is deeply corrosive to our economy.
"When pay for senior executives is set behind closed doors, does not reflect company success, and is fuelling massive inequality, it represents a deep malaise at the very top of our society.
"The British people believe in fairness and, at a time of unparalleled austerity, one tiny section of society - the top 0.1% - continues to enjoy huge annual increases in pay awards.
"Everyone, including each of the main political parties, recognises there is a need to tackle top pay."
The report called for a number of reforms, including a "radical simplification" of executive pay, putting employees on remuneration committees and publishing the top 10 executive pay packages more widely.
It also said firms should publish the pay ratio between the highest-paid executive and the company median, and make firms reveal the total pay figure earned by executives.
The commission also said a new national body to monitor high pay should be established.
TUC general secretary Brendan Barber said: "Top directors seem to think that austerity is just for the little people. This is not just unfair, but bad for the economy as this vital report makes clear.
"Many of the report's recommendations - from allowing ordinary workers on to remuneration committees to give executives a much-needed dose of economic reality, to forcing companies to publish pay ratios between top directors and ordinary staff - can and should be implemented straight away.
"The truth is that the extraordinary transfer of wealth from ordinary people to those at the top is not just morally repulsive, but a key ingredient in the economic crash."
Archbishop of York backs High Pay review findings and an end to corrosive pay deals
The Archbishop of York today welcomed today’s report of the High Pay Commission’s independent inquiry into high pay and boardroom pay across the public and private sectors in the UK. The Commission, established by Compass with the support of the Joseph Rowntree Charitable Trust, is calling for an end to corrosive pay deals.
The Archbishop said:
“The findings of this inquiry match closely with my own views, expressed in the Yorkshire Post earlier this month. I believe that fundamental changes in public attitudes are needed, and these can take place quite quickly.
"Part of our task in creating a more caring and equal society is to change attitudes to excessively high incomes and the accumulation of private wealth without clear evidence of generously contributing to the common good.
"It is interesting to see in the report that four out of five people now think that pay and bonuses for top executives are out of control.
"It is a view I have long held, and I am glad to see that evidence now bears out my own opinion that executives’ compensation bears no correlation to a firm’s performance.
"I also welcome the suggestion that pay packages should be simplified and made more transparent."
The Archbishop explained that there needs to be wider recognition of inequality as an ethical issue, and stressed the need to tackle tax avoidance by rich individuals and multinationals. He said: “I have already suggested that all people should tick a box on their tax forms and it is my hope that tax evasion will soon be a thing of the past”.
The Commission criticised the current structure of remuneration committees stating that there is a need ‘to break open the closed shop that sets pay for our top directors and get back to basics for executive pay, with more scrutiny from a cross-section of society’ .
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