Farewell Fat Cat Wednesday, will you come along any sooner next year?

How can it be right that an executive can earn a seven figure bonus after a matter of months?

Share
Related Topics

Hats off to the High Pay Centre. Fat Cat Wednesday is a great concept. In case you hadn’t heard, it is the day at which the average FTSE CEO had made what the average British worker makes in a year.

It says it all that it occurred just eight days into the new year.

To be strictly accurate we reached that point by the middle of the morning of January 8.

But if the City is true to form it’ll be Fat Cat Monday next year. Or even Fat Cat Sunday.

The Centre, an independent think tank which campaigns to reduce the income gap between those at the top of society and the rest of us, has been arguing that someone needs to tell top bosses that they have had long enough in the sweet shop.

Please note, this is not a party political thing. It’s just common sense. How can it be right that an executive can earn a seven figure bonus after a matter of months, when their impact on a business can be limited at best?

Improving corporate performance requires the work of multitudes of people. If it happens, they should all share in the rewards. But this is rarely reflected in practice. We have allowed a system to develop where those at the top take all the credit and reap most of the benefit.

This is a nonsense. And potentially a dangerous one. Societies with large income disparities in income tend, historically, to be less than stable.

We’re starting to get to that point. According to the Centre, boardroom pay at Britain’s top companies has increased by 74 per cent over the past decade, while wages for ordinary workers have remained flat at best in real terms.

While there’s been a squeeze on pay generally, even relatively stingy companies (and they’re rarities) say they like to pay something close to the “median” average (in other words, they want to be in the middle) to those in the boardroom. No one ever boasts of being in the bottom quartile when it comes to their execs. Or even the bottom half.

That means that top pay inexorably rises. Because every time there is a review, the remuneration consultant says to the remuneration committee (usually made up of current and former execs who either benefit or have benefitted from the system) your chaps need a rise. They are under paid compared to their comparators.

Along comes the next company, and the same arguments are deployed, rises are handed out, and up goes that median again. Even where that median argument is not stated publicly, it’s used in private.

What’s more, if an executive’s basic rises then everything else rises. Bonuses and long term incentives are all either a percentage, or more likely, a multiple of the basic number.

And so it goes, with those at the top snaffling an every greater share of the wealth that is created by organisations.

Efforts to bring some sanity to the process have so far had little impact. Big institutional investors have proved reluctant to use even the advisory votes on remuneration reports that they have. They claim that it’s more effective to make their concerns known behind closed doors.

The Centre’s figures - culled form companies’ annual reports - show just how effective this “quiet lobbying” is. Not very.

And so the telephone numbers get progressively longer. Can anything change it?

Well, now shareholders have more than advisory vote. Vince Cable has handed them binding votes on pay policy.

So a “no” vote will cause more than just embarrassment. It could force companies to go back to the drawing board when it comes to setting remuneration at the top.

Will it work? We’ll see.

The current pay levels are not in shareholders interests for a number of reasons. It’s not only the inequality that’s problematic, or the fact that the impact a single executive can have on a huge organisation is often grossly overstated.

Making the sort of money that they do means executives have increasingly become divorced not only from reality, but from the customers they serve.

There are a host of other arguments I could call on. You’ve probably read them before. You’ll doubtless read them again when the annual report and AGM season gets into full swing.

The point I’m making here is that shareholders need to use the new power they have been given. The sweet shop needs to close. And if it doesn’t, then Mr Cable needs to take further action. Because it’s just getting silly.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Recruitment Genius: Finance Assistant / Credit Controller

£16000 - £18000 per annum: Recruitment Genius: They are an award-winning digit...

Ashdown Group: Senior VMware Platform Engineer - VMware / SAN / Tier3 DC

£45000 - £55000 per annum + benefits: Ashdown Group: Senior VMware Platform En...

Recruitment Genius: Purchasing Assistant

£10000 - £16000 per annum: Recruitment Genius: A distributor of specialist ele...

Recruitment Genius: Sales Ledger Assistant

£17000 - £19000 per annum: Recruitment Genius: A distributor of specialist ele...

Day In a Page

Read Next
Labour and the Liberal Democrats would both end winter fuel allowances for pensioners with enough income to pay the 40p tax rate  

Politicians court the grey vote because pensioners, unlike the young, vote

Andrew Grice
US President Barack Obama and Chinese President Xi Jinping have a drink after agreeing a deal on carbon emissions  

Beijing must face down the perils of being big and powerful – or boom may turn to bust

Peter Popham
Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

Homeless Veterans campaign

Donations hit record-breaking £1m target after huge gift from Lloyds Bank
Flight MH370 a year on: Lost without a trace – but the search goes on

Lost without a trace

But, a year on, the search continues for Flight MH370
Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

Germany's spy HQ springs a leak

Thieves break into new €1.5bn complex... to steal taps
International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

Whirlwind wit of Simone de Beauvoir

Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

Confessions of a planespotter

With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
Russia's gulag museum 'makes no mention' of Stalin's atrocities

Russia's gulag museum

Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

The big fresh food con

Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

Virginia Ironside was my landlady

Tim Willis reveals what it's like to live with an agony aunt on call 24/7
Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

Paris Fashion Week 2015

The wit and wisdom of Manish Arora's exercise in high camp
8 best workout DVDs

8 best workout DVDs

If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

Paul Scholes column

I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

From the Azteca to Vicarage Road with a million followers

Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

Khan ready to meet winner of Mayweather v Pacquiao

The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable