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Cable still doesn’t get the extent of corporate greed

Vince Cable, to give him credit, is the one member of the Cabinet who is seriously concerned about pay extremism in the boardroom. The rest are seriously in favour of it. But the measures he has so far put in place, albeit harried at every turn by the Tory Right, will achieve little.

He has given shareholders a binding vote at least once every 3 years on executive pay policy, and that each CEO’s remuneration package should be published as a single total. He has now written to the chairmen of remuneration committees of Britain’s FTSE-100 companies insisting they do more to curb top pay, and if they do not, then with indeterminate menace their ‘business’ licence to operate’ could be undermined. What the latter threat actually amounts to is anybody’s guess.

All of this is still fairly feeble stuff when the ratio of the FTSE-100 chief executives’ total pay to the average earnings of their employees was 120:1. This is up from 47:1 in 1998, a near 3-fold increase in the ratio in a a mere 16 years, and up from 25:1 in the 1970s. All the evidence is that business is cocking a snook at these pleadings for restraint, led as always by Barclays which has just raised bonus payments by 10%, despite a one-third drop in pre-tax profits.

The strongest argument now being made that the message for moderation has now got home to business is that bonuses in 2013 fell 1% for the third consecutive year – though what is not said is that this is a minuscule drop for bonuses pitched at 4-5 times basic salary.

Even on Cable’s modest terms, he could be tougher. He could insist that shareholders be given a binding vote on exec remuneration every year instead of every 3 years. He could require investors to disclose whether they voted, and if so, how. But that is still fiddling about in the foothills. What is really needed is to give employees a voice on boardroom pay on the very justifiable grounds that they contribute their work day in and day out on behalf of the company, while most investors pay little heed to the operations of the companies they invest in – they simply watch the share price.

This is practicable because the time for Enterprise Councils is long overdue, to enable all those who participate in the company’s performance to be able to express their opinion, via their chosen representatives, on all aspects of the company’s operations, not just the working conditions. Such meetings should take place at least once or twice a year, and embrace, initially at least, the top 1,000 companies. One of the items on the agenda, but by no leans the only one, would be executive pay.

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