Connected Research

Union policy research in the 21st century

Thinking about executive remuneration

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Robert Peston, the BBC’s commentator on business affairs, has today blogged about executive remuneration amongst the country’s largest companies – a bit of a theme for Connected Research over the last week or so.

Amongst the gems that Peston reports are that:

– the median (mid-point, ranged from lowest to highest) total remuneration package for FTSE100 chief executives in 2008 was £2.6m, while the 2008 cash bonus was unchanged, at £514,000

– the mean rise in the remuneration package for executives in 2008 (2%) was lower than the median rise (7%): this is likely to mean not only that the figures were not affected by a small number of large rises (at least, none which had a distorting effect on the overall figures!) – but also that, at the same time, it is the vast mass of executives that have done well: proof that, on the one hand, a rising tide does lift all boats equally…

– over the last ten years, average chief executive remuneration amongst FTSE100 companies has risen by 295% while the average earnings of ordinary employees have risen by 44%, leading to a rise in the ratio of the pay of the average chief executive to the average worker from 47:1 to 128:1.

Or perhaps, on the other hand, it’s proof instead of a different proverb: that there is indeed one rule for one and one for the rest.

Peston argues that this largesse has accompanied the large-scale destruction, not creation, of wealth amongst FTSE100 companies  – an undeniable point, in the current circumstances, even if his measures of that are somewhat open to criticism. The gap in rewards between boardroom and shopfloor is of a sickening nature, by itself, and this is made worse by the extent to which it is a growing one. Given that executive pay is determined by and within the executive club, and that institutional shareholders seem patently unable to exert control over that process, even in times of executive failure, perhaps the time has come for legislation setting a maximum ratio of chief executive pay to that of the average employee. Corporate executives should not be exempt from the desire to hold public figures more accountable which has emerged in recent weeks and, if the existing mechanisms of control are inadequate, legislative ones may provide a suitable alternative for an agenda based on establishing social justice.

After all, it is our money – as future pensioners – which is being gambled away and the failure to exercise control over that process is one that is, ultimately, vested in large part in those who have investment responsibility for our pensions.

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Written by Calvin

02/06/2009 at 6:47 pm

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