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John Lewis boss defends fat cats

Institute of Directors' Convention told why business leaders should be treated like pop stars
Britain's fat cats found themselves an unlikely ally yesterday inStuart Hampson, chairman of John Lewis, the department store chain that eschews conventional capitalism in favour of employee involvement, profit-sharing and social responsibility.

Mr Hampson told the Institute of Directors annual convention at the Albert Hall that business leaders should not feel "management guilt" about maintaining proper pay differentials between the boardroom and the shop floor.

"I don't see the real problem as 'fat cats'. What's wrong is that there are too many 'thin cats' in business who deserve to be fattened up," he said. "As directors of companies we should have no problem in proclaiming loud and clear that business needs to reward talent and achievement. Wherever we look the most talented players are going to be sought after.

"No one cries 'scandal' about the transfer market between football clubs, about the huge sums paid to top sportsmen, about the fabulous fees commanded by the Three Tenors. Business is bound to operate along similar lines to secure a key player."

Mr Hampson, who earned pounds 343,499 last year, said however that it could not be right that in most businesses, incentives and rewards were focused disproportionately on senior management at the expense of other staff who deserved to feel valued and motivated. "I firmly believe we need to find a greater sense of fairness in the relationship between rewards at the top and those throughout the business as a whole. If more thin cats were having their contributions to success recognised and being fattened up we'd be demonstrating that wealth creation benefits all those who create wealth and not just the few who hold the wealth. That's a step towards making industry recover its respect in society."

John Lewis has 36,000 employees - all of whom are called partners and own the business with shares held on their behalf through a trust.

Each year every employee from the chairman down to the lowest paid storeman receives the same percentage of their salary as a partnership bonus. Last year a total of pounds 82m was handed, out equivalent to 20 per cent of pay.

"I can tell you, if you want to show your workforce how well the business has performed over the past year, a 10-week bonus is a pretty clear message."

In his book, said Mr Hampson, if you wanted to satisfy the customer you had to start by putting the employee first. "If you think of employees as a resource to be utilised as required, to be discarded when times get hard, to be down-sized or re-engineered, then don't be surprised if they behave like it."

Mr Hampson went on to warn that respect for business and business leaders had taken a major knock as a result of the fat cats debate. "Let's face it. "The Greenbury Report hasn't put the matter to bed. It's just led to repackaging. The pounds 1m-a year-club continues to recruit new members as long-term incentive plans trip in."