UK is lagging in fight to curb the fat cats, think-tank warns
Monday 27 May 2013
Britain is failing to tackle excessive pay and falling behind rival countries, a damning report has claimed.
The think-tank the High Pay Centre has criticised the UK for rejecting measures introduced elsewhere in the world, claiming that only giving shareholders a vote on pay is not enough by itself.
Deborah Hargreaves, director of the High Pay Centre, said: "The UK has historically led the world in standards of good corporate governance and responsible business practices, but we are falling behind. This situation needs correcting."
The High Pay Centre pointed out that the salary of a FTSE 100 chief executive is now 185 times greater than the average, while the share of income going to the wealthiest 1 per cent of the population now stands at 14 per cent compared with 6 per cent in 1979.
It also highlighted recent figures showing that there are more bankers earning over £1m at Barclays than executives at public companies across the whole of Japan taking home the same. "Any market that suggests there are more talented individuals working at Barclays than across the entire Japanese economy is clearly failing," said Ms Hargreaves.
The report comes in the wake of the annual general meeting season, which saw more than 10 per cent of investors vote against executive pay at companies such as HSBC and Prudential.
In 2012, the business world was rocked by the "shareholder spring", which cost executives including Andrew Moss at Aviva and Sly Bailey at Trinity Mirror their jobs.
Despite this, the High Pay Centre warned that "'say on pay' alone is ineffective" as voting is controlled by "wealthy investment fund managers, who also benefit from a culture of high pay".
The UK has rejected stronger measures undertaken by other countries. In Germany, executive pay is now set by company supervisory boards, which include democratically elected employee representatives.
Switzerland has banned golden hello and golden parachute payments that award executives unconditional multi-million-pound packages simply for accepting or leaving a job
The High Pay Centre said shareholders alone "lack the capacity and political will" to address the problem of excessive pay, and has called for the Government to take action.
Ms Hargreaves added: "Excessive executive pay... damages businesses by diminishing the morale of ordinary workers, and by creating, as the Salz report into the Libor manipulation scandal at Barclays argues, a reckless arrogance among the highly paid."
She added: "The UK's comparatively weak response to the problem sends out a clear message about inequality, and whether or not the Government thinks highly visible and grossly disproportionate rewards for a tiny, privileged elite represent a problem."
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