Leading article: Just talking about 'fat cat' pay is not enough

 

Share
Related Topics

Fairness is said to be at the heart of the Coalition's economic recovery strategy. So it is only fair to acknowledge that David Cameron put his finger on the right issue when he proclaimed yesterday that things are unfair at the top. The growing disparity between the top 10 per cent and those at the bottom of British society makes a mockery of Chancellor George Osborne's suggestions that "we are all in this together".

But recognising the problem with executive pay and actually doing something about it are two different matters. It is all very well for Mr Cameron to admit that there has been market failure, but his pledge to address this with market-based solutions gives cause for concern. In the past, that has meant calls for greater transparency to enable the capitalist system to start the process of self-correction.

Certainly more openness is required. But all the evidence is that transparency is not enough. There has been transparency, of sorts, about bankers' pay and bonuses. That has produced public anger and general vilification of the banks. But the bankers have carried on paying themselves obscene amounts regardless of the outcry. Transparency is a necessary but not a sufficient, condition for change.

What is required is greater intervention, and at a level which does not sit well with the Conservatives' ideological predispositions. Mr Cameron made some reference to the need to give shareholders greater control over top pay. There is cross-party agreement on that. It was one of the central themes of the Labour leader, Ed Miliband, when he drew a distinction between predators and producers in the business world in his conference speech last year. The Business Secretary, Vince Cable, has made robust noises on the subject.

A few key Tory backbenchers may be thinking in the same way. George Osborne's former adviser Matthew Hancock has published a book on market failures at the top. Another big thinker, Jesse Norman, has tackled the issue of what he calls "crony capitalism", which disguises economic reality, shields underperformance and cossets poor management.

The key question is whether the Conservatives are ideologically capable of empowering shareholders against managements and directorial élites. It is one thing to say that it is up to shareholders to curb excessive executive pay. But in reality over the past decades they have not done so. So directors and senior managers paid themselves as they saw fit and sat on one another's remuneration committees in a self-referential and mutually self-rewarding élite. Where shareholders could vote on these deals their vote was merely advisory.

We will know whether Mr Cameron is serious only when we see the detail of his proposals. Votes on directors' pay at annual general meetings must be binding, not advisory. Something must also be done to fix the ratio of pay between a company's highest and lowest earners. And staff representatives should be brought on to remuneration committees.

Mr Cameron has made noise to the effect that he is happy to look at such matters – usually political-speak for not doing much. But such are the kinds of intervention in the market which are required if Britain is to rediscover the checks and balances that allow our economic system to operate more fairly, safely and effectively.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Java Developer - 1 year contract

£350 - £400 Per Day: Clearwater People Solutions Ltd: Our client based in Cent...

Junior Analyst - Graduate - 6 Month fixed term contract

£17000 - £20000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

SAS Business Analyst - Credit Risk - Retail Banking

£450 - £500 per day: Orgtel: SAS Business Analyst, London, Banking, Credit Ris...

Project Manager - Pensions

£32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

Day In a Page

Read Next
Sorrento  

I was about 12 when I began celebrating my birthday by sobbing over sad music

Howard Jacobson
 

Errors and Omissions: In thrall to a word that we don’t quite comprehend

Guy Keleny
Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone