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High executive pay `sending us back to Victorian times'

Simon Ward
by Lovemoney Staff Simon Ward on 22 November 2011  |  Comments 30 comments

A new report reveals the massive increases in executive pay levels over the past 30 years.

High executive pay `sending us back to Victorian times'

Pay for top executives has soared by more than 4,000% in the last 30 years, according to a new report. Meanwhile, average wages only increased three-fold in the same period. So are we returning to Victorian times, when the top 0.1% of the population earned a fortune and the rest of us just had to make do?

The report by independent body the High Pay Commission, Cheques With Balances: Why Tackling High Pay Is In The National Interest, claims that executive pay levels are set by a “closed shop” and are not transparent to shareholders, staff or the public.

The report lays bare how executive pay at major companies has rapidly accelerated. At Barclays, for example, the chief executive was earning 14.5 times the average salary back in 1980 (with total earnings of £87,323). By 2010, this had risen to 75 times (£4,365,636).

That’s an increase of a whopping 4,899.4%.

Corrosive effect

The Commission says that increasing levels of pay, “when it is patently not linked to performance, or rewards failure” is having a “corrosive” effect on the economy. It makes the fairly obvious point that this affects morale and reinforces a feeling of ‘them and us’.

It has put forward a 12-point list of recommendations, including paying top bosses a basic salary and “one additional performance-related element only where it is absolutely necessary”. It also suggests having employee representatives on renumeration committees and establishing a permanent body to monitor high pay.

It concludes that, without action now, the top 0.1% will take home 14% of the national income. And those are comparable figures with Victorian Britain.

Critics should “move to Cuba”

Corporate headhunter Dr Heather McGregor fanned the flames of the debate on BBC Radio 4’s Today programme, when she said that people who don’t like high executive pay should “move to Cuba”.

But with the Occupy London protest still in situ outside St Paul’s Cathedral, this issue is not one that’s likely to disappear quickly.

What do you think about executive pay levels? Are they out of control? Do the Commissions' proposals make sense? Let us know what you think via the comment box below.

More: How to stop paying tax | British misery index hits 19-year high!

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Comments (30)

  • deryck23
    Love rating 10
    deryck23 said

    Thank you for that - short clear concise

    Where can I get a copy of the report?

    deryck

    Report on 22 November 2011  |  Love thisLove  0 loves
  • lazban
    Love rating 5
    lazban said

    The problem is that someone will say 'If you drop our pay and divide it amongst the rest you will only get a couple of pounds each whereas if we keep it we can buy lots and lots of goods etc, and pay the country lots of tax'.

    Unfortunately we've heard it all before and Cameron, Osbourne and their cronies will bow to any pressure from this elitist high paid lot to keep them sweet.

    Report on 22 November 2011  |  Love thisLove  0 loves
  • LaurenceSt
    Love rating 4
    LaurenceSt said

    The people at the top don't realize that a more equal soceity is a better one, for everybody!

    See http://www.equalitytrust.org.uk/resource/the-spirit-level The world produces enough for everybodies need, but not for everybodies greed.

    Report on 22 November 2011  |  Love thisLove  0 loves
  • ydnaharap
    Love rating 2
    ydnaharap said

    The Lunatics are in charge of the asylum why else did we get into this unfoldining modern day replay of the Great Depression. What is really frightening is self same elitist well educated proffesionals are going to get us out, alledgedly we are all in the same boat.

    Problem, not an once of common sense, between any of the consorting economists and politicians in league with Bankers and Multinationals.

    My Grandparents more literate that most today with the miniumum of education and expense, were never better off than when they retired on a state pension during the seventies and knew you can't spend more than you make.

    Never mind Hugh Grant's hacked phone has more importance currently than the fact we kill our lads every couple of days in Afganistan. Populist Politicians Pong with their hidden agendas?

    Report on 22 November 2011  |  Love thisLove  0 loves
  • fenemore
    Love rating 251
    fenemore said

    This culture is the reason why CEOs of town councils earn huge salaries. The argument is that their pay should be on a par with CEOs of large companies. NO IT SHOULD NOT. Why DO council need CEOs anyway? They just provide local services funded by a guaranteed income source - US! It is not as if WE can shop around for those services. Anyone with a couple of O-levels could do the job for a fraction of those sky high figures.

    CEOs in the private sector are a breed apart. At that level, they just play musical-chairs. On rolling contracts - they are completely insulated from any fiscal responsibility - no matter how badly they perform, no matter how many companies they wreck, no matter how many lives they devistate - they simply walk away with a fortune - probably to their "Club" where they rub shoulders with others in their circle.

    A couple of G & T's later they have probably secured another position and so the cycle begins again.

    To solve this we need to change shareholder rules. At present, when voting it is the weight of your holding that counts. This means pension funds and institutions call the shots - and as the Actuaries of those instutions are probably CEOs drawn from large companies, the self-interest is obvious. They are hardly going to vote against CEO remuneration increases. The small shareholder has no chance.

    As it is the shareholders that own companies - it is difficult to see how this self-indulgence can be moderated.

    Report on 22 November 2011  |  Love thisLove  0 loves
  • chrisc
    Love rating 0
    chrisc said Report on 22 November 2011  |  Love thisLove  0 loves
  • LaurenceSt
    Love rating 4
    LaurenceSt said

    Just to put oil on the fire: you know why the guys in Afghanistan are dying for:

    Copied out of the Independent 15 June 2010:

    Afghanistan, often dismissed in the West as an impoverished and failed state, is sitting on $1 trillion of untapped minerals, according to new calculations from surveys conducted jointly by the Pentagon and the US Geological Survey.

    The sheer size of the deposits – including copper, gold, iron and cobalt as well as vast amounts of lithium, a key component in batteries of Western lifestyle staples such as laptops and BlackBerrys – holds out the possibility that Afghanistan, ravaged by decades of conflict, might become one of the most important and lucrative centres of mining in the world.

    Report on 22 November 2011  |  Love thisLove  0 loves
  • smithdom
    Love rating 33
    smithdom said

    Dr McGregor presumably has a vested interest in high renumeration as she probably earns commission based on the value of the renumeration package secured for her clients.

    Part of the problem is that most of us don't understand what these executives do to justify their income, and they don't seem to be too interested in explaining it to us. I don't have any issue with extreme wealth generated by artistic or business endeavour, such as with Sir Paul McCartney or Steve Jobs, but it seems on the face of it that many of these executives are not particularly remarkable and are rewarded out of all proportion to their contribution. Renumeration should be in the form of a basic salary plus share options that cannot be exercised for several years so that the individual's prospects are aligned with the long term prospects of the company they work for.

    I'd like to see a few of the highest paid being interviewed at length and asked to justify their income in business and moral terms. I'd like to understand what motivates them. It can't be as simple as the acquisition of wealth.

    Report on 22 November 2011  |  Love thisLove  0 loves
  • AMayall
    Love rating 0
    AMayall said

    I buy a million toilet rolls for a £1 each and sell them for £2. I am a millionaire and nobody would object. If I set up a company to do the same and keep all the profits for myself, that doesn't look so good. So long as we have a "mixed economy" there will always be this problem. We know that going to Cuba isn't the answer. There are just as many anomalies in Communist countries - the party leaders will always find a way to milk the system.

    The old fashioned way to avoid the excesses was progressive taxation. Then instead of the entrepreneur taking the lot he has to share his luck/success with the rest of us or more likely with the accountants and lawyers who will organise his affairs. It's the same in the arts or sport. Are the present stars any more deserving of wealth than Stanley Matthews who earned not a great deal more than his contemporary craftsmen? It's the economy - stupid!!

    How do you compare the value of a surgeon with a footballer? Supply and demand. Well, perhaps. The sportsmen can have such short careers - poor things! So did a lot of coal miners.

    We need a new system but who will set it up. Answers on a PC please.

    Report on 22 November 2011  |  Love thisLove  0 loves
  • LaurenceSt
    Love rating 4
    LaurenceSt said

    @Amayall: It is a bit complicater than that: if you buy a lot of toilet rolls, the risk is that you can't sell them for twice the buying price is completely yours. If a CEO puts a company is such a state that it requires some of your toilet rolls to get out (actully quite a few) he/she still gets the bonus. And even a golden handshake.... I remember mr P.Barnevik http://news.bbc.co.uk/1/hi/business/1866190.stm was forced to pay back a part of his pension, maybe we should ask for the same..

    Report on 22 November 2011  |  Love thisLove  0 loves
  • bengilda
    Love rating 100
    bengilda said

    Be it politicians, top public servants or private sector senior executives, those who decide their own rewards have been largely uncontrolled for many years. Pay review bodies and the like have been set up but have been ineffective in controlling runaway increases largely because they are comprised of members of those same groups.

    Publicly funded top salaries must have a limiter, such as no more than eight times the average wage of the previous year. A review board comprised of 11 members of the general public (to exclude public employees and political post holders), a third rotating out each year, needs to be established to approve or reject all public funded salaries in excess of three times the average wage of the previous year.

    In the private sector all salaries more than three times the national average wage of the previous year must be individually approved before implementation by shareholder majority.

    Simply put, control of their emoluments must be removed from the recipients.

    Report on 22 November 2011  |  Love thisLove  0 loves
  • oldhenry
    Love rating 343
    oldhenry said

    You will find that the government are intending to wind the clock back further than Victorian times. I reckon to the days of serfdom. There will be a removal of all the welfare reforms of the last 100 years , all in the name of the economy. Meanwhile all Directors can be registered offshore to avoid tax and to buy helicopters, as long as they loan them to ministers at election time of course.

    Do you all not see how corrupt the UK has become at a political level? I think it has and we need a complete shift at the top , both Labour and Tory are corrupt. The Liberals are plain mad but still dangerous.

    Report on 22 November 2011  |  Love thisLove  0 loves
  • spoonfulofdreams
    Love rating 8
    spoonfulofdreams said

    You are right about the political establishment. The expenses scandal only highlighted the corruption in our political system. Its truly unbelievable how shameless the rich and powerful are. In another age this would have sparked a revolution. Maybe its time for a revolution of sorts if we have the stomach for it.

    Report on 22 November 2011  |  Love thisLove  1 love
  • eLJay
    Love rating 78
    eLJay said

    It's a mix of 'Jobs for the boys' and people who think they need a leader and to pay them a lot. Ultimately a con to keep the stakeholders quiet and provide an adequate target. Your being paid so that if you last only 2 years you will survive, the truth is they generally go and find another position within 2 years.

    Report on 22 November 2011  |  Love thisLove  0 loves
  • driver67
    Love rating 26
    driver67 said

    Well Thatcher got her way; 'back to Victorian virtues'

    (I want to know how she claimed £535,000 in expenses for 'public appearances' in the last 5 years)

    Report on 22 November 2011  |  Love thisLove  0 loves
  • LaurenceSt
    Love rating 4
    LaurenceSt said

    Do you know how expensive these handbags are??

    Report on 22 November 2011  |  Love thisLove  0 loves
  • stephaniewm
    Love rating 0
    stephaniewm said

    Of course I think high executive pay is a scandal. How could anyone not? Even the executives must be ashamed.

    Report on 22 November 2011  |  Love thisLove  0 loves
  • KirkStJohn
    Love rating 0
    KirkStJohn said

    Are people still banging on how everything is Maggie Thatcher's fault? Maybe you'd like to go back to being the sick man of Europe as we were in the 1970s. Thanks god for Maggie. The greatest PM since Churchill, and three straight election wins say the majority approved of her policies.

    Executive pay in private sector companies is a matter for the shareholders and directors of the those companies and no one else. Maybe the moaners would like to do as Dr McGregor suggests and go where pay is capped like Cuba or North Korea. London is one of the major financial centres in the world and the top earners are going to get what seem like astronomical sums to the rest of us. You might as well moan about footballer's wages. They operate in a free market and to criticise just smacks of jealousy.

    Maybe we should be more concerned about the levels of pay in the public sector with some council "Chief Executives" ( haha that's a joke considering these CE's run organisations with no competition and a guaranteed index linked income - nice work if you can get it) earning more than the PM and presiding over some of the most digracefully wasteful organisations in the country. It's public sector spending that is going to be our downfall and this obsession with fatcats is just a smokescreen

    Report on 22 November 2011  |  Love thisLove  0 loves
  • Stickwithit
    Love rating 10
    Stickwithit said

    It's too late in the day now for anything to be done. The lack of restraint means that while fat cats are stashing away the wealth of the country they are storing up trouble for themselves and no-one can do anything about it. It's bound to end in tears.

    Report on 22 November 2011  |  Love thisLove  0 loves
  • conor
    Love rating 0
    conor said

    There is an e-petition to limit bosses pay (x20 of the minimum in that company). May not do anything but if it reaches 100,000 and a deabate is rejected by parliment it would be create a stink

    http://epetitions.direct.gov.uk/petitions/20645

    Report on 22 November 2011  |  Love thisLove  0 loves
  • smithdom
    Love rating 33
    smithdom said

    KirkStJohn,

    What you say might work if shareholders had more power. When they do vote down executive renumeration they are often ignored as the shareholder vote is seen as advisory and not binding.

    What would you say has changed to account for the ever expanding ratio of executive earnings compared to average earnings of their employees? Do executives today make so much more of a contribution than their employees when compared to executives and employees of previous generations? I think not.

    When companies won't self regulate and shareholders are powerless to influence them then we see the excesses now evident. It isn't about jealousy, its about fairness.

    Report on 22 November 2011  |  Love thisLove  0 loves
  • MikeB55
    Love rating 6
    MikeB55 said

    The top executives are very stupid and will provoke a reaction. In Victorian times they were usually founders of the business and risked their money. Now they are often lucky gamblers betting other peoples money. They must consider whart happened in France in 1789 - the overthrow of the aristos and the terror of 1793.

    Report on 22 November 2011  |  Love thisLove  0 loves
  • MK22
    Love rating 169
    MK22 said

    @KirkStJohn, I too compare Maggie to a great leader of the war years. My choice is Hitler on the grounds Maggie destroyed more of British industry that Hilter's bombers did. In terms of popular support for her policies, as with most UK elections, at no time did more than 45% of the electorate vote for her so no, the majority did not approve of her policies, or at least not enough to be bothered to vote for them.

    Report on 22 November 2011  |  Love thisLove  0 loves
  • amwell44
    Love rating 77
    amwell44 said

    No, the lunatics are to be found amongst those who have posted the above comments.

    Report on 22 November 2011  |  Love thisLove  0 loves
  • Souptrombone
    Love rating 0
    Souptrombone said

    It's very out of balance at the moment. Political opinion has moved sharply to the right since the eighties, which has let top salaries rip, without restraint. The right would argue that among top earners there will be those that will benefit the economy as a whole through investment in the UK and growth in our economy, but I think it's time for the top earners to be hit hard in their pockets for a short time to reduce government debt, especially as Cameron's policies, by his own admission, are failing to reduce the debt.

    Report on 23 November 2011  |  Love thisLove  0 loves
  • nickpike
    Love rating 308
    nickpike said

    They're feathering their nest. They know what's coming.

    Report on 26 November 2011  |  Love thisLove  0 loves
  • Mike10613
    Love rating 626
    Mike10613 said

    Money is like energy, it can't be destroyed really. Even if you burn it, you can take the ashes to the Bank of England and get your money. Contrary to popular opinion, the Chinese don't have it all. The money isn't really going to shareholders and certainly isn't going to the workers. The Telegraph:

    Staff compensation at Barclays Capital increased by 24pc in the past 12 months, with the average worker in the division receiving a payout this year worth £235,807 compared with £191,000 in 2010.

    That is the tip of the iceberg:

    http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8327345/Barclays-Capital-staff-get-24pc-pay-rise.html

    A Chinese student in China said all their politicians are corrupt sending their children to the best school and universities. I told her it was the same here and I am sure David Cameron will have his kids go to Eton and Oxford just like him; class and communism - same difference.

    Report on 26 November 2011  |  Love thisLove  0 loves
  • uptherevolution
    Love rating 2
    uptherevolution said

    We laugh at corruption in third world countries where $20 slipped to an official will get you out of trouble.... here the corruption is at an higher level and they aren't interested in $20.

    These CEO's executive and non executive directors are in a club of their own and having a laugh, they really dont need to pay themselves so much but they seem to be competing with each other and must spend all thier working day justifying and patting themselves on the back, how many times do they f*** up big style and still get a bonus.

    Everyone gets the same time (give or take) on this planet, why should some peoples time be worth so much more than others? everyone should contribute as they can, but the end result should be something that needs doing, we have companies making hugh profits producing marketing tat that is land fill almost instantly paid for tax deductable.

    There are lots of moves to prevent discrimination. Money or the lack of it is the biggest cause of discrimination.

    We are all so bored with all the free time we have that we are happy for entertainers to earn huge fees, entertainers were fools and jesters years ago when people were too busy to need to be entertained. Scientists, Doctors, pioneers, and other usefull people were peoples heros.

    Report on 26 November 2011  |  Love thisLove  0 loves
  • tuttogallo
    Love rating 99
    tuttogallo said

    To coin a tired old phrase "something must be done" about the obscenely high pay of top executives.

    The fact is that it doesn't work. The extra cash to those few top people doesn't "trickle down" it gets put into hedge funds, where it is used for private equity asset stripping and other trouble making activities. Extra cash given to lower paid people gets spent which stimulates the economy. I am not a socialist. This is common sense.

    The remuneration committees are stuffed with people whose continued employment depends on keeping on the right side of the CEO and they are not going to say no to his demands for high pay rises.

    I favour the continental approach of putting worker representatives on the remuneration committees, by law. This is not socialism, it's doing what works.

    Lower paid people need to see CEOs taking their fair share of the hard times. Anything else is damaging to the morale of the country and we need good morale in order to succeed economically.

    Report on 28 November 2011  |  Love thisLove  2 loves
  • disbeliever
    Love rating 10
    disbeliever said

    The present situation is not really comparable to Victorian times:- 140 years ago the people with huge rewards were usually owner-proprietors of the enterprise, with their own capital at risk. Now, the directors and senior executives form an exclusive kleptocracy, sitting on remuneration committees to constantly inflate each other's pay, using the purchased opinions of "remuneration consultants" to provide a supposedly independent justification for it. Of course, the consultant's fee is based on the pay recommended, so there is an incentive to raise the rewards as high as possible. This has led to the present situation, where directors and executives get a salary for holding the job, extra pay for remaining in it, more for just turning up occasionally, and even more at the end of the year, irrespective of results, with targets revised downwards if the original target is not achieved. Share awards and cheap options ensure that the ownership of companies is slowly being taken away from shareholders. If only some of the greedy and incompetent parasites would carry out their threats and go work for our foreign competitors, British business would prosper again.

    Report on 01 December 2011  |  Love thisLove  1 love

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