The Cadbury Committee on corporate governance, some would say, started it all by saying - in effect - that all big companies should have remuneration committees composed of independent non-executive directors.
True to the Law of Unintended Consequences, these committees duly sprang up, deliberated thoroughly and decided that their colleagues on the board, far from being paid too much, were being paid too little. Independent or not, the remuneration committees have spent the past five years rubber- stamping the big salary rises, bonus plans and share option schemes that have caused all the public fuss. Next it was the turn of the House of Commons Employment Select Committee.
All through the spring, MPs "grilled" Cedric Brown of British Gas and other privatised utility executives about the huge financial rewards that privatisation has brought them. Last week, unable to agree on a "unanimous" report, they produced two, instead.
Now it is the turn of the Greenbury Committee, the body of top industrialists set up by the CBI with the Government's blessing to look at practical steps to take the heat out of an issue that has embarrassed ministers and company chairmen alike. The committee has all but completed its report, and its findings will be presented soon.
To nobody's surprise, it has come out against the idea of wholesale legislation to control the level of executive pay. That is a small relief - legislating how much people should be paid is taking the principle of indignation to an absurd degree.
The biggest surprise is that the committee appears to have come down in favour of trying to restrict senior executives in British companies to one-year contracts, in place of the three-year contracts that were becoming the norm. In practice, it may be hard to make this condition stick. More than half British directors in big companies have rolling contracts of two years or longer.
The committee is also proposing sensible steps to ration the award of share options so that the rewards they generate are more closely linked to executives' own performance; and to insist on greater disclosure of information about what boards are paid. Rather than legislate across a broad front, they want these and most of their other recommendations to be incorporated into a code of practice included in the Stock Exchange listing requirements for quoted companies.
The Government, if it is sensible, will not be in any hurry to legislate. It is true that the Companies Act in Britain remains woefully short on detail about how companies should be run: shareholders would benefit from having a greater say in how directors are paid.
But, since most of the political flak has focused on the pay awarded to the privatised utilities, there are clear dangers in trying to impose general legislative solutions on what, is, to a large degree, a problem confined to a narrow sector where the worst damage has already been done. Not least is the risk of the Law of Unintended Consequences striking once again.
The Pensions Bill passing through Parliament stands as an awesome example of how good legislative intentions can breed bad law.
In the case of executive pay, the danger is that measures that restrict the earnings opportunities or mobility of senior figures in industry will carry a price tag in terms of lost competitiveness that British industry can ill-afford.
There is no doubt the system of remuneration has been badly abused in recent years, and where once British businessmen were woefully underpaid, they are in danger of going to the other extreme.
The fact remains, however, that much of the executive pay issue has been debated in terms of moral and political indignation, rather than subjected to any careful cost-benefit analysis.
Study after study has shown that there is very little discernible link between changes in individual bosses' pay and the performance of their companies. It clearly needs to be made tighter, and shareholders are the ones to demand it.
But what is the link between the absolute level of pay that industrialists receive and the performance of their companies and the economy? The short answer is that nobody yet knows, but logic suggests that it is a positive one. In the past 10 years, the pay of big companies' highest-paid directors has risen 115 per cent in real terms, representing a huge shift in the price put on top management talent.
It can only have a significant effect on the number, the calibre and the behaviour of those who work in industry.
Just as the labour market and privatisation reforms of the Thatcher years will long outlive the few things that the Tories have achieved in the macro-economic sphere, it is a fair bet that the changes in executive pay will one day come to be seen as one of the most important supply-side reforms of the 1980s, long after the fuss about Cedric Brown's 75 per cent pay rise has died away. But that does not mean the Greenbury Committee will not be in for a hostile reception in 10 days' time.Reuse content