Margareta Pagano: WH Smith's investors are right to revolt

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The Independent Online

Whenever I venture into a WH Smith shop, my heart sinks as the assistants are so miserable, their service sloppy and finding even the plainest of envelopes is a chore.

One of the worst is my local in Saffron Walden, the nearest place to go to stock up on school supplies; the Woolies is dead and Smith's itself took over from the wonderful independent bookshop, so it now has a monopoly on all things pen and paper. You can't even blame the girls and boys who work there for their sullenness; but you can blame the managers and, if they can't get them smiling, the chief executive, Kate Swann.

So I was intrigued to see that investors in WH Smith aren't happy either. At its annual meeting last week, more than 30 per cent of the votes cast on the remuneration (why can't they call it pay) package were abstentions or against. The total pay awarded to Swann and her fellow directors was £2.3m – mainly shared between two people – £1.3m for her and £580,000 for finance man Robert Moorhead. Compared with most corporate pay, this is quite modest, and down from the previous year.

This makes it all the more interesting that so many investors are revolting. They have a history of making their feelings known; they ousted the former chief and protested against Swann's golden hello. I'm told the Association of British Insurers had an amber alert out on WH Smith when the new package was being debated and many investors met the management to hear their case. But they had given them the thumbs up – until last week's vote.

So what's changed their minds? Is it simply that they are not happy with WH Smith's share price ? Or are they becoming more considered in their approach now that the FR2 stewardship code is soon to be in place? Or is it that investors are waking up to the fact that in the real world wages have been frozen while executive pay has been on fire? As Mervyn King, the governor of the Bank of England, said last week, average real incomes are falling fast, the first time this has happened since the 1920s.

While bankers' bonuses have taken the limelight, the pay of the UK's biggest companies has been quietly soaring. The average pay of FTSE 100 chief executives has grown by 15 per cent a year from less than £1m in 1998 to about £4m – compared to average annual earnings growth at 4 per cent for the rest of us, until now that is. And research shows executive pay will continue to rise at about 15 per cent a year, doubling every five years. That means by 2015 the average FTSE chief's pay will be about £8m and by 2020 it will hit £16m; and the FTSE 250 – including WH Smith's – can't be far behind.

The issue is not just whether the bosses are worth it when measured against the share price or return on capital. More pertinent is the acute difference between pay for workers and bosses; just as with social mobility, it's getting worse rather than better. Back in the late 1980s, pay and annual increases were based on some sort of multiple between workers and managers. Today, there is no relationship. We need to change the way pay committees set their levels, banish benchmarking averages and those dreadful pay consultants. The investors at WH Smith are on to something and hopefully will give others courage to say so too.

This is your Captain speaking: Hudson river pilot flies at Davos

The real crowd-puller at Davos this year wasn't Peter Gabriel or Nicolas Sarkozy but a retired pilot whose message about integrity is hitting the right buttons. Captain Chesley "Sully" Sullenberger is the US pilot who safely landed a plane carrying 155 passengers on the Hudson River two years ago after his jet hit a flock of birds. His sessions on "Leadership Under Pressure" and "Exploring the Extremes" – held with a deep-sea diver and an Everest mountaineer – were the first to sell out, with another 100 or so people on waiting lists. The Captain's message to the political elite and captains of industry was unfashionably stark: that leadership is about sacrificing short-term gain for the long term, however personally awkward. "I was telling my older daughter what integrity meant to me and I said it was about doing the right thing even if it's not convenient. I might tell her now it's having real values and choosing to live by them." Clearly Davos people still have something to learn.

Ministers should listen to Sir Richard on vision. He's doing them a favour

Oh, happy chance. A hacks' drinks party at No 11 last week with the Chancellor and his Treasury ministers – just a day after Sir Richard Lambert used his final speech at the CBI to bash the coalition for its lack of a growth plan. It meant we heard first-hand how surprised and genuinely puzzled some ministers were at his outburst. One was even drawn to whisper: "With friends like him, who needs enemies?" Lambert's been such a staunch ally, after all – before the last election and after. As the voice of business, he backed the coalition, advising that tough cuts were the best way to slash the deficit. But puzzled ministers are missing a trick. They should reread his speech and learn. By and large, the public has accepted cuts, and understands there'll be pain for many years ahead. But what angers us – and business – is that there's no upside being communicated. It's only natural to want a glimmer of hope, to hear how we can get out of this mess, how new jobs can be created and what government can do to help. A growth White Paper was due last autumn, but is now coming with the Budget – apparently to allow departments to come up with proper measures. But who outside Westminster knows that?

So far, the coalition has failed to communicate any vision and there's a real danger that people will only see the brutality. And, to my mind, the departure of No 10 PR man Andy Coulson has more to do with this miscommunication than it does with the phone-hacking scandal. The Essex boy was supposed to be the one who gave the PM the ear of the people. But it may well be that he's been trumped by a knight with an even keener ear to the ground.