Executive pay ‘corrosive’ to economy
The salaries of Britain’s executives are “corrosive” to the economy and “out of control”, according to an independent report by the High Pay Commission.
The year-long inquiry said that the pay of top executives had soared by more than 4000 per cent in the last 30 years, undermining productivity and “damaging” trust in British business.
The report said average wages in the UK have only increased threefold, to £25,900 from £6,474 in 1980, whilst “stratospheric” pay increases to executives have seen a disproportionate wealth flow upwards to the top 0.1 per cent of people in the UK.
It said John Varley, Barclays’ top executive in 2010, earned £4.36m last year – 169 times the earnings of an average British worker, whereas in 1980 top pay at Barclays was just 13 times the average.
“There’s a crisis at the top of British business and it is deeply corrosive to our economy. When pay for senior executives is set behind closed doors, it does not reflect company success and is fuelling massive inequality. It represents a deep malaise at the very top of our society,” High Pay Commission chair, Deborah Hargreaves, said.
Pay for top FTSE executives should be restricted to basic salary plus a single performance element instead of the three or four that are commonplace, the commission recommends.
It says pay packages have become increasingly complex, damaging relations with shareholders and creating confusion, and it calls for “a radical simplification of executive pay”.
Employees should also be put on remuneration committees, and firms should reveal the total pay figure earned by executives, the report continues.
It also says a new national body to monitor the salaries of Britain’s top executives should be established.
TUC general secretary Brendan Barber said: “Many of the report’s recommendations – from allowing ordinary workers on to remuneration committees to give executives a much-needed dose of economic reality, to forcing companies to publish pay ratios between top directors and ordinary staff – can and should be implemented straight away.”
