Money: In the wrong hands? Photo credit: Laura Amalthya
High executive salaries are “corrosive” to the British economy, according to a new report. The year-long High Pay Commission inquiry found that Britain’s top 0.1 percent of earners have seen dramatic rises in pay, while the average worker remains mired in financial gloom. Deborah Hargreaves, chair of the High Pay Commission, wrote that the country is heading towards a level of wealth inequality not seen since Victorian England.
The salary of the chief executive of Barclays Bank has risen almost 5000 percent over 30 years, according to the High Pay Commission report.
The report came as UK Prime Minister David Cameron revealed that the Coalition debt plan was not working as expected, according to The Telegraph, with the deficit reduction timetable off-course – which means the prospect of tax cuts is even further off. Chancellor George Osborne is expected to cut forecasts for economic growth next week.
And The Times (£) published a poll that shows, unsurprisingly, that confidence in the British economy is at a record low, with 79 percent of respondents believing the country would do “badly” over the next 12 months.
As the news gets worse for the average worker, what should be done about sky-high executive salaries?
Performance-related pay? Writing for The Guardian‘s Comment is Free, Hargreaves argued that the High Pay Commission’s research shows little correlation between performance and pay, which undermines companies’ claims that they have to pay out large salaries in order to snare top talent. Hargreaves also argued for greater transparency when it comes to executive pay and bonuses and urged companies to consider the report’s recommendations: “We are calling on companies to recognize that it is in their best interests to act now to resolve this, before more draconian rules are imposed from above.”
Government intervention. Nils Pratley agreed in The Guardian that companies need to simplify pay arrangements for greater transparency, and also called for “breaking up the cosy clubs that set pay at the top”. However, Pratley argued that government intervention is inevitable as companies won’t change their ways of their own volition: “It’s time for solid reforms rather than pleas for restraint,” he said.
Not easy. Writing in The Independent, David Prosser argued that reforming top salaries is far from simple, and that campaigners need to work out which issue they’re trying to tackle: “Is it the absolute level of the rewards paid to senior executives, or the way in which those rewards are decided?”
Market failure. In The Telegraph Mary Riddell said that the pay gap is not just about social inequality: “Excessive pay has become the most potent symbol and proof of market failure,” she wrote. Riddell insisted that the reforms advocated by the High Pay Commission are welcome but are not enough to tackle the fundamental issue of global financial crisis. Pointing to the inability of politicians of all parties to come up with a coherent plan, Riddell suggested we may be coming towards “the end of politics”.
“The public is rapidly running out of patience with a system that allows those at the top to enrich themselves while everyone else struggles to make ends meet,” wrote Deborah Hargreaves in the High Pay Commission report.
Told you so? The issue of corporate greed and the ability of traditional politics to deal with the issue is central to the Occupy movement, with activists happily tweeting about the High Pay Commission report. Writing on The Guardian‘s Comment is Free, Peter Hallward argued that the movement will grow and effect change: “For the 99%, the power is ours to make and to take,” he said.
