Mark leftly: Anger over pay is just the free market in action

Billionaire Glasenberg is a master of supply and demand, so how can he not see that there are enough 'good' chief executives to moderate remuneration?
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The Independent Online

Ivan Glasenberg simply doesn't get it. There were plenty of people in the 550-strong audience at the Melbourne Mining Club dinner at Lord's on Thursday who could barely contain their laughter as the South African billionaire made a quite stringent, fairly straightforward, logically sound, but totally absurd argument.

With a straight – not to say stern – face, he defended one of the more ludicrous examples of outrageous executive pay: Mick Davis's £28.8m "retention" bonus just for turning up to work over the next three years.

Davis will get those golden handcuffs as chief executive of the behemoth that results from the merger of his mining empire, Xstrata, with Glasenberg's powerful commodities trader, Glencore. Glasenberg told the great and the good of the mining industry that "if you want a good CEO, then you have to pay for him", warning that any boss worth his or her salt would walk away from the job should shareholders be foolish enough to vote down their pay.

The trouble is, that as a billionaire – even if mostly on paper – Glasenberg can't look at this issue with a sense of proportion. To him, these aren't shocking sums for a talent he feels the new company will need. The rest of us are no more rational, as we struggle to understand how salaries beyond our wildest expectations are justifiable, no matter how rare a beast that industry leader might be.

But, Glasenberg's background should give him some idea of what is going on. As a trader of everything from ferroalloys to sugar, who made his fortune by calculating the logistics behind supply and demand, he must know the lazily-named "shareholder spring" is, in simple free-market terms, a huge market correction.

Salaries at the top tables of the FTSE were in an unsustainable bubble. It is no good for WPP chief executive Sir Martin Sorrell to argue, as he did to my colleague Margareta Pagano in an interview with our daily sister paper last week, that his £12.9m pay package is "linked totally to how WPP does – 85 per cent of it is index-linked".

Few critics have a problem with that principle, particularly when his remuneration fell with the fortunes of the company during a difficult 2009. The real issue here is the absolute amounts that are being earned at a time that wage inflation is so low. The gap between top executives and their staff is growing wider, even though each step up the ladder is unlikely to be vast in terms of the skills needed.

Research last week from consultant Income Data Services, for example, showed the average package for a FTSE 100 finance director was close to £1.1m while the average worker's salary is stuck in the mid-£20,000s. The assumption that people capable of being an FD are 40-odd times rarer than those capable of being an average worker feels instinctively wrong.

So unusual were sizeable votes against remuneration reports that the sheer number of recent revolts, from insurer Aviva to media group Trinity Mirror, came as a huge surprise. Many of us doubted that institutional investors really gave a damn about executive pay, that any debate was a sideshow to the real business of a company's share price performance.

But the pace of that change shows that, taken as a whole, institutional investors believe there are sufficient potential chief executives out there who will be willing to take less pay for the chance of running major companies. As WPP's general meeting next week and Xstrata's July vote on the remuneration plans could show, the market believes that there are just as talented people out there as Sir Martin and "Mick the miner".

It was time for the wage bubble to be burst – with a sledgehammer rather than a needle, as it turned out – which will mean fresh faces will emerge at the helm of major companies when the "good CEOs" take Glasenberg's advice and walk away. Because to be merely good is no longer good enough to justify pay packages that run to tens of millions of pounds.

Hunger striker's plight is a warning to Dubai's investors

This column's thoughts go out to Safi Qurashi, the south London businessman who paid $60m (£38.9) for the UK "island" in Dubai's $14bn World manmade archipelago off the Emirate's coast. On Friday, the one-time property magnate was taken to a police hospital, having collapsed six weeks into a hunger strike over his ridiculous seven-year incarceration.

Qurashi, who has lost 15kg and has seen his diabetes worsen as he refuses to accept any food or liquid other than water, was locked away over bounced cheques, a severe crime in the United Arab Emirates if the reason is a lack of funds. In Qurashi's case, the cheques did not bounce for that reason, rather they were cancelled, and a court-appointed auditor has even shown no money is outstanding.

No matter – his appeals keep failing and much of his time in court is akin to a show trial, with hearings lasting, so his supporters claim, about 30 seconds. Why the British Government continues to fail to intervene is cause of bafflement and anger, as well as huge distress to his family – one of whom sounded on the verge of emotional collapse when I spoke to her on Friday.

There are many other horror stories over bounced cheques that have led to almost-certainly innocent people rotting in Al Awir jail, a 20km journey from many of the grandest hotels that symbolise Dubai's avarice.

British professionals and entrepreneurs have been particularly quick to build their fortunes in the country. But, this case is a poignant reminder that the UAE is, no matter how benevolent, a dictatorship that fails the basic concept of rule of law.