A permanent body to investigate and report on levels of executive pay which have now reached "stratospheric" levels should be set up by the Government, an inquiry concluded today.
The High Pay Commission reveals that the pay of top executives has soared by more than 4,000 per cent in 30 years, undermining productivity and "damaging" trust in British business.
It recommends that a body should be established with access to Revenue & Customs data on pay to monitor trends at the top of the income distribution and report to ministers.
As The Independent reported yesterday, the Commission also calls for companies to be forced to publish details of the pay gap between top executives and their average employees. It also recommends that workers should be represented on remuneration committees.
The report was welcomed by the Government, who said the recommendations would feed into its own ongoing review of executive pay.
"Many of the options we are consulting on are reflected in the High Pay Commission's final report and we welcome their contribution to this important debate," said Vince Cable, the Business Secretary.
"There is widespread consensus, not just among the public but in the business community, that this is unacceptable and is undermining the credibility of our markets-based system. What I'm working towards is responsible capitalism where rewards are properly aligned with performance."
Labour also welcomed the report. "On each of these proposals, the High Pay Commission's report backs the approach which Labour has taken," said Chuka Umunna, the shadow Business Secretary.
The High Pay Commission's study detailed the pay of Barclays' former top executive John Varley who, the study said, earned £4,365,636 – 169 times more than the average worker in Britain today, and an increase of 4,899.4 per cent since 1980 when the top pay in Barclays was just 13 times the UK average.
The chief executive in Lloyds Bank has seen his pay increase by 3,141.6 per cent to £2,572,000 over the same period – 75 times the average Lloyds employee. In 1980 it was just 13.6 times that of the average Lloyds worker, said the report.
Average wages in the UK today are a "modest" £25,900 – up from £6,474 in 1980 – a three-fold increase.
The report showed that decisions to award huge pay packages are set by a "closed shop," shrouded in highly complex detail, effectively hidden from shareholders, staff and the public.
"Stratospheric increases in pay are damaging the UK economy – distorting markets, draining talent from key sectors and rewarding failure," the report said. "There appears to be little truth in the myth that pay must escalate to halt a talent drain in executives. The growing pay gap between the top 0.1 per cent and everyone else is increasing public disillusionment, damaging trust and fuelling the view that business leaders are in it for themselves."
A poll of more than 2,000 members of the public found that four out of five believed pay and bonuses for top executives were out of control.
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