There was a significant amount of chortling in LDV Towers over the Telegraph’s report of Vince Cable’s comments about One Direction’s earnings. One member of our team even suggested photoshopping his head onto this photo of the boy band wearing onesies. Mercifully, copyright and lack of photoshopping skills on my part spares you that sight.
Vince thought he was being asked about, I presume, a director’s £5 million salary, which he described as “mad”, “downright immoral” and “grossly offensive”. It would be hardly surprising that he would take that view given his actions to curb executive pay. He added, as soon as he realised his mistake:
I don’t want to attack One Direction; this is one particular group who are apparently very popular and very successful so I have nothing against them.
But there is a general issue of Chief Execs in particular who are paid well beyond what can be justified in terms of the performance of their companies and that’s something the Government is now trying to address. I’ve brought forward legislation in Parliament that will take effect in October where shareholders will have a much stronger grip of their companies, there will be binding votes and much more transparency.
To me, though, the most important part of that article is when he tells how he defied the Low Pay Commission, who had recommended that the minimum wage for apprentices should be frozen because there was evidence that many employers were not complying with it. He insisted on an actual increase, saying:
Apprenticeships are at the heart of our goal to support a stronger economy, and so it is important to continue to make them attractive to young people. Therefore, I am not taking forward the LPC’s recommendation to freeze the apprenticeship rate due to non-compliance, but instead am raising it in line with the youth rates. We are working on a series of tough new measures to ensure we tackle non-compliance issues across the board.
Another thing we can put down to the Liberal Democrats being in Government, I guess.
* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings
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8 Comments
@Caron: “Vince thought he was being asked about, I presume, a director’s £5 million salary”
You presume? Or, that was what Vince claimed shortly after the comment blew up in his face. I understand that “I misheard the question” was the official line.
Having said that, there is a distinction between suggesting that “a director’s £5 million salary” is “mad”, and that “Chief Execs in particular who are paid well beyond what can be justified in terms of the performance of their companies” is “mad”.
If a director is being paid £5 million to run a very profitable company extremely well, it might very well be sane. It is not hard to imagine that a company with profits over (say) £100 million might see profits deviate by more than £5 million depending on whether the Chief Exec performed well or badly, so that it would be well worth paying £5 million to get the right candidate.
OTOH, if the Chief Exec performs badly, it should be for the company, rather than the government, to act to curtail her remuneration. This is especially true as only the company can judge whether (for example) a decline of profits from £100 million to £90 million is a sign of bad management, or of good management in difficult times that might otherwise have seen profits fall far further.
Giving “shareholders … binding votes and much more transparency” is to be welcomed, but lets not drift into Government incomes policies and such like. It’s bad enough that we have a man who is in the second richest 1% in the country decrying the high incomes of the richest 1%, which some might think a tad hypocritical.
I think a director earning £5million from the company is fine, but only if they run the entire company single handed. 🙂
It must be a very wonderful society/environment that enable the director to earn so well. I expect this wonderful person will want to ensure the society and community stays wonderful too, and will be very happy to contribute a lot to their wonderful society. Yay.
As for Vince Cable, I am pleased to see he is pushing the government in the right direction. One small step for man, etc…
@CPhillips
Tax and NI on £5m is £3m. So yes they are contributing to society.
@Simon McGrath,
Go on, how do you work that out? The *marginal* rate of income tax above £150,000 is (now) 45%. The National Insurance Rate for most of it is 2%. So that adds up to just over £2.3m. Obviously still an impressive amount, but you’re £700,000 out…
@Foregone Conclusion
Only 2% NI!
Hold on a minute, all the averagely wonderful people pay 12%. We shouldn’t cut off our wonderful directors in this way, its just not fair on them. Let them pay 12 % like everyone else, otherwise they will feel excluded and get all grumpy.
Especially as they can well afford it. It seems rude and churlish not to,
as if we are saying:
“no, you’re not allowed, we don’t want your contribution to the nation (though national insurance)”
And the wealthy person is saying:
” But I want to! I can afford it, honestly! I like this place and it has made me so successful, I want to give something back”
And we (our gov) says:
” Hmm, Im not convinced. But we’ll let you pay 2%. Thats 10% less than everyone else – because you are worth 10% less to this country” (scowls, spits)
Wealthy person:
🙁 Whyyyy :'(
Not for the first time Vince seems to have this the wrong way round: apparently it’s fine for talentless group to make £5m each whereas a CEO who actually has skills and contributes way more is unacceptable :roll eyes:
Of course it isn’t really any of the government’s business in either case, they should just focus on making sure the tax system is fit for purpose to take their slice, But depressing that Vince seems to think it’s appropriate to stick his oar in on this. Not very Liberal 🙁
I don’t have any problem with a boy band member earning £5M if that’s what results from their songwriting, performing and sales. It directly correlates to their success. If only CEOs were rewarded on the same basis!