Tag Archives: fair pay

Chief Executive pay: is it tied to performance?

The LSE’s Centre for Economic Performance has been looking at the evidence on Chief Executive pay in the UK. Their conclusion? It is tied to performance – and is more tied to performance than it used to be. But it is a lopsided link with smaller cuts when things go badly than the increases when things go well. What’s more, when things go well Chief Executive pay rises much more than pay for others.

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What’s the most effective way of ensuring fair wages for low earners?

The question arises from James Graham’s excellent blog on how raising the personal income tax allowance, a central plank of Liberal Democrat influence in the Coalition, makes it more likely that large companies will pay fairer wages.

James was responding to Zoe Williams in the Guardian (well worth a read), who rightly highlights the negative societal impact of companies paying their employees wildly differing amounts – sky-high executive salaries at one end of the spectrum, and sub-living wages at the other that  have to be topped up by complex and costly welfare spending.

Of late there has been …

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Opinion: Lib Dems should welcome and put into practice most of the High Pay Commission’s recommendations

Some bald statistics before the ranting begins: In 1979 the top 0.1% of earners took home 1.3% of the national income; by 2007 this had grown to 6.5%. In 1979 the top 1% took home 5.93% of the national income; by 2007 this had grown to 14.5%. In 1979 the top 10% took home 28.4% of the national income; by 2007 this had grown to 40%. In 2010 alone, executive pay in FTSE 100 companies went up by an average of 49%, against a 2.7% rise amongst employees in these firms. Top bosses now take home nearly 7% of total …

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Lib Dems back High Pay Commission’s proposals to curb excessive executive salaries

The High Pay Commission, an independent inquiry into top pay in the private sector, published its final report yesterday. Here’s how The Guardian reports its key conclusions:

The commission sets out 12 recommendations to tackle high pay. The main reforms include:

• Greater transparency in the calculation of executive pay to end the “closed shop” on pay decisions. At present, many people do not understand until it is too late how a vast salary – often composed of as many as seven different elements – is worked out.
• Putting employees on remuneration committees, a move included in the government’s own

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Opinion: Time to publish the magical ratio

A week is a long time in politics, but it also sometimes seems to move at a glacial pace.

It is now two decades since Bill Clinton won the presidency on the slogan that ‘trickle down economics’ doesn’t work. Yet even a couple of years ago, there was Labour’s Peter Mandelson being ‘relaxed’ about people getting ‘filthy rich’.

Well, finally things seem to be shifting. Even Max Hastings, of all people, writes in the Financial Times that “gross disparities seems likely sooner or later to promote an upheaval, perhaps graver now than most western societies can now envisage.”

It certainly seems to …

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The Independent View: Public support action on excessive pay gap

The clamour for action on excessive pay is growing, not least from some of our biggest business names. Sir Stuart Rose, of Marks and Spencer, recently suggested that the gap between CEO pay and the wages of ordinary workers might have got out of control, while the newly appointed President of the CBI, Sir Roger Carr, this week described ‘rewards for failure’ as “unforgivable”.

Yet the idea that very high salaries can be justified as long as they are deserved is called into question by research from the High Pay Commission, which found that executive pay has grown by 7 per cent a year in real terms over the last 10 years, compared to annual average real growth of just 0.8 per cent between 1949 and 1979. Researchers can find no evidence that UK firms have done better over the last 10 years than in the 1950s, 60s and 70s. Nor is there any evidence that senior executives are significantly more mobile than ordinary workers or modern firms more complex to run, as many supporters of the rapid increase in top pay argue.

Posted in The Independent View | Also tagged and | 6 Comments

Hutton review publishes its interim report into fair pay in the public sector

Yesterday saw the publication of the interim report from Will Hutton’s Review of Fair Pay in the Public Sector, commissioned by the government.

The bald headline from the report is one of modest reform: moving toward recommending the introduction of a 20:1 maximum ratio between the top and bottom salary in any public body. This ratio is more generous than existing pay arrangements, but it is more radical than that superficially makes it appear.

First, the ratio has been increasingly and is likely to continue to do so, particularly with public sector structural reforms the government is planning. So introducing a cap that looks modest now may yet have a radical impact in the future.

Second, as I wrote in June:

It provides a fair pay benchmark which campaigners, pressure groups and the public can use more widely. Whatever is decided to be the formal extent of its applicability, there is nothing to stop people pushing for its wider adoption and there is good evidence that pay at the very top of the private sector has got out of control, increasing far faster than profits, turnover or other performance would justify. Partly because of the number of firms who set their top pay saying that it must compare well with the rest of the sector, there has been a self-reinforcing upward spiral in pay as everyone pushes up everyone else’s top pay.

A 20:1 ratio would still allow for generous top pay, but stop that cycle – if it ends up applying more widely. Whether or not that happens is not just a matter for central government. For example, even if the government holding the majority of shares in a bank does not mean the 20:1 ratio applies to that bank, that doesn’t stop a campaign to introduce such a ratio. The use of the 20:1 ratio across large parts of the economy will provide a clear benchmark that will make those sort of wider campaigns more effective.

It’s easy to see how over time the 20:1 ratio could become a standard applied to suppliers to the public sector, by ethical investment funds, by good corporate practice lobbyists and more.

The full report (or at least the executive summary) is well worth a read, particularly for information such as this graph:

Fair Pay graph

Will Hutton Review of Fair Pay Interim Report

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