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.