This story in the BBC about boadroom pay rather worries me. While I have a great deal of sympathy with Nick Clegg's frustration at top managers getting big rewards for failure I'm not convinced it is something the government should intervene in directly.
The people who should decide who is on the board, and therefore the renumeration committees that set pay, are the shareholders. Shareholders have a stake in the company's success or failure, if they feel the need to get a big salaried, high flyer to run the company is it right for the government to tell them they can't? If government policy prevents a preferred candidate getting recruited can the company get some form of recourse if the second preference candidate turns out to be a flop?
The government should not dictate how the private sector reward their top talent. How would Manchester United fans feel if the government prevented Sir Alex Ferguson from paying Wayne Rooney the money he felt he deserved?
Labour want to legislate to force companies to have members of staff on the renumeration committee. Many companies do this already and I can see lots of advantages in doing so, but once again I feel very uncomfortable with the idea of forcing all companies to do something just because I think it's a good idea.
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Agreed it is not govt business to determine pay but you are hiding behind an idealist argument that shareholders should decide without realising that it is virtually impossible for shareholders to have any say in pay policies..
Today's shareholders have no power to force or reverse executive pay... These decisions are concentrated in the board of directors.... Toadays shareholders don't even have much power to appoint board of directors because of the majority voting structures and fragmented holding prevents anyone from securing enough block of votes.
Pick up any FTSE 100 company annual report .. No one controls more than 10% of shares... And who are most of the shareholders? Faceless pension funds or investment funds .... Which on the face of it manage your and mine money but you and I have no ... Absolutely zero .... Power to influence their voting ... In fact they don't even ask us ... When was the last time some one consulted you about voting on RBS pay even though it is 80% owned by taxpayers?
Even if you are retail shareholder, your shares are mostly in nominee company and it's impossible to get yourself right to vote via nominee structure.
So please stop deluding yourself that shareholders can decide because they cannot ....
Govt needs to stepping to ensure certain powers are returned from corporations to shareholders first. Things like
- easy and el trouncing voting by shareholders
- simplifying voting for retail shareholders even if in nominee structure.
- trigger points built in companies act which require absolute majority shareholder approval on certain points like salary 1000 times higher than national median income.
- publications of all earnings above 1000 times national median income...
As for the point about Rooney, I can bet, if fans had any say in deciding wages, the footballer wages would come down drastically .... The reasons the footballer wages are so high because no one can effectively veto that...
Nick Clegg's words are an empty threat that won't worry any fat cats. Employee representatives will make no difference to boardroom pay unless they were to have a majority on the remuneration committee, which would never happen.
If the government felt the gap between rich and poor was too great they could easily introduce taxation that help change this. The 50% tax rate, which Osbourne wants to scrap is a good start, but the government needs to find a way to get a little more from the millionaires in this country. France and Switzerland have a wealth tax for the richest people which may not help limit the salaries of millionaires, but will get a little out every year while they hold on to their assets.
The mansions tax proposed by Vince Cable would probably be an easier system to administer, but it would be nice if it took account of all assets.
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