Connected Research

Union policy research in the 21st century

Compass calls for high pay commission

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Pressure group Compass has called for the establishment of a high pay commission to curb excessive pay amongst ‘masters of the universe’ and to assist in the establishment of a ‘fairer, more stable and sustainable economy for the future.’

Compass’s statement, led by Brendan Barber of the TUC, Jon Cruddas (Labour MP for Dagenham) and Vince Cable (Liberal Democrat Shadow Chancellor) and supported by 97 other signatories encompassing Labour loyalists alongside more radical voices, has also appeared as a Letter to the Editor in today’s edition of The Guardian. Here, the authors of the Letter call on the government to take ‘decisive action’ on the ‘excessive levels of banking and executive remuneration packages’ which have had such a ‘damaging and corrosive effect on the real economy and wider society’. Compass is calling on members of the public to add their signatures, which you can do here.

Against the background of the successsful establishment of the Low Pay Commission in 1997, a high pay commission would be charged with the review of executive pay and coming up with proposals to restrict excessive remuneration, such as maximum wage ratios (for which Connected Research has called for in the past), and the taxation of bonuses.

No doubt warned of the initiative, Alistair Darling yesterday referred (amongst other things) in an interview with the Sunday Times to the possibility of changing the law to ‘toughen things up’ on executive bonuses, with a law likely to be forthcoming in the autumn covering the entire banking system designed to ensure that bonuses are paid on the basis of sound overall performance rather than on taking risks which jeopardise institutions (and economies). The Treasury had already dismissed last week’s plans from the Financial Services Authority for a remuneration code of practice as not going far enough.

The arguments are undeniable, not just from the perspective of the financial-led economic crisis but also from that of establishing a fairer society. There is a need to ensure that levels of executive remuneration, which have rocketed compared to that of the ordinary employee, are controlled both from the point of view of ensuring that there is no reward for failure while also delivering overall remuneration within an organisation which fits within the principle of ‘felt fair pay’. What we have currently is the reverse and a high pay commission to address that (while looking at the overall level of executive remuneration, not just basic pay) is an essential ingredient in identifying what can be done about it. People are right to be increasingly angry at excess in the financial sector and if the commission can build on that, while opening people’s eyes to executive excess not being limited to financial services, it will have done a good job.

The government may well turn out not to be sympathetic to the notion of a high pay commission (or it may surprise us all) – but that doesn’t change the need for one to be established, or to the job it could do. That might be a question for the wider labour movement a little way down the line although a version with official status is clearly preferable.

[Edit 18 August: Alistair Darling has already rejected the notion, according to the BBC. That shouldn’t prevent continued lobbying activity aimed at changing his mind in the meantime, but proponents of social justice would do well also to consider in the slightly longer-term how a non-official version might best be secured.]

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Written by Calvin

17/08/2009 at 12:58 pm

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