cantankerous worked with the pay consultancies in top FTSE companies. The greed and corruption of the FTSE executives and the corporate ‘reward’ consultancies was blatant and disgusting, and it is remarkable that nothing was done to stop it. As executives reduced the amount paid into pension schemes for ordinary staff by sometimes as much as a half, they simultaneously reduced the number of years to qualify for a full pension in their executive final salary pension schemes. There were/are major British companies which, in some years, have paid more into their ‘executive’ pension schemes for a chosen few than they have into their degraded defined contribution pension schemes for tens of thousands of employees. UK plc will have to pick up the bill for future pensioner poverty.
The truth is that institutional shareholders have shown themselves incapable and disinterested in this troughing. One solution is penal tax rates, which make the greed pointless. We had this in the 1970s and it was not UK plc’s finest hour, though we still might get to that point, though it would be better to use company taxation regulations than personal tax to change behaviour.
The ratios idea is not an option, as the executives know how to use Microsoft Excel: it will result in a mass of outsourcing, offshoring and sacking of the lowest paid, which will reduce the ratio without hitting pay.
The ‘employees in the boardroom’ idea won’t work either, as those employees will become corrupted and overpaid themselves and will go native (look at some of the corruption scandals in Germany with employee representatives on boards).
The big clue about what to do is the fact that by far the most vocal and effective critics of boardrooms have not been institutions but rather small shareholders (often pensioners reliant on dividends), who feel personally ripped off. So, a simple solution is to introduce the same kind of voting into companies which we use in our democracy: one member, one vote.
Give all shareholders, irrespective of the size of their shareholding, one vote each on the approval of executive remuneration. And then watch executive pay begin to come under control.
We also need to provide incentives for companies to be public and accountable rather than private and unaccountable. We can achieve this through the tax system, providing incentives for public companies. Otherwise watch yet more companies go private and offshore so that executives can continue to rip off inactive shareholders, which is what this is about.