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

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Recruitment Consultant / Account Manager - Surrey / SW London

£40000 per annum + realistic targets: Ashdown Group: A thriving recruitment co...

Ashdown Group: Part-time Payroll Officer - Yorkshire - Professional Services

£25000 per annum: Ashdown Group: A successful professional services firm is lo...

Day In a Page

Read Next
 

Election catch-up: Blairites for and against a Miliband victory

John Rentoul
Nicola Sturgeon could have considerable influence over David Cameron in a hung parliament  

General Election 2015: What if Cameron were to end up in debt to the SNP?

Steve Richards
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before