Outlook: Boardroom pay

BEING ESSENTIALLY a Glastonian Liberal at heart, Tony Blair has always believed he ought to be able to rely on businessmen to lead by moral example and exercise restraint in the amount they pay themselves. Unfortunately it doesn't work that way in the modern world, if it ever did. Since Labour came to power, the pay differential between those at the top of the pile and those at the bottom has continued to widen.

The boardrooms of Britain's largest companies increasingly feel it necessary to pay themselves according to global, generally American, benchmarks, and there has been a continued news flow of multi-million pound remuneration packages for senior executives. Barclays is having to pay Mike O'Neill an American style package of salary, options, shadow options and bonuses to persuade him take the chief executive's job; he refused to come for any less.

So if executives cannot be relied upon to exercise restraint, what can the Government do about it? Like John Major, it could refuse offending businessmen their gong, but that doesn't seem to do the trick either. Nor can Labour, having fully converted to the cause of free market economics, realistically impose restraint centrally through Act of Parliament. Alternatively it could tax the rich more highly, but only the Lib Dems believe in doing that.

Instead, Stephen Byers, the Trade and Industry Secretary, is reported to be falling back on that old chestnut - obliging shareholders to do their duty. Such an approach is not entirely without merit. Rarely do shareholders get an opportunity to vote directly on director's pay, and even when they do, the structure of share ownership in Britain, with control focused in the hands of a small number of highly paid fund managers, means their stance is often an apathetic one.

This could be remedied in two ways. Companies might be obliged through the listing requirements to put directors' remuneration to the vote on an annual basis, in the same way as they do with auditors' fees. Secondly, pension fund trustees might be obliged to exercise that vote - with abstention no longer an option. There is a general objection to be made to any form of legally imposed coercion, but even so, neither of these measures could be regarded as particularly contentious. But whether they would have what Mr Byers seems to regard as the required effect, is another thing. Nor is it clear that to put moral pressure on shareholders to ratchet down the salaries of their executive officers is in their own best interests. We can all point to examples of excess in the boardroom, but if the effect is to make British boardroom pay uncompetitive when set against the alternatives, then that would plainly be a bad thing.

PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Luis Suarez looks towards the crowd during the 2-1 victory over England
sport
Life and Style
Cheesecake frozen yoghurt by Constance and Mathilde Lorenzi
food + drinkThink outside the cool box for this summer’s frozen treats
News
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Sport
Sir Bradley Wiggins removes his silver medal after the podium ceremony for the men’s 4,000m team pursuit in Glasgow yesterday
Commonwealth games Disappointment for Sir Bradley in team pursuit final as England are forced to settle for silver
Sport
Alistair Brownlee (right) celebrates with his gold medal after winning the men’s triathlon alongside brother Jonny (left), who got silver
England's Jodie Stimpson won the women’s triathlon in the morning
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trade Desk Specialist (Linux, Windows, FIX, Finance, Networks)

£60000 per annum: Harrington Starr: Trade Desk Specialist (Linux, Windows, FIX...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Project Manager - ETRM/CTRM

£70000 - £90000 per annum + Job Satisfaction: Harrington Starr: Project Manage...

C#.NET Developer

£300 - £350 per day: Harrington Starr: C#.NET Developer C#, WPF,BLL,MVVM, SOA...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform