David Cameron told the BBC's Andrew Marr this weekend that the Government would soon introduce measure to curb "excessive" executive pay. Can't wait to see how that works out, especially as Vince Cable, whose reach has consistently exceeded his grasp since he joined the coalition Cabinet, is apparently in charge of the initiative.
Cameron's interview with Marr was full of references to "fat cats" and to something he called "crony capitalism". To be fair to the PM, cronyism is certainly something he knows rather a lot about. Of the 29 Cabinet members (including those who attend but don't actually vote), 20 are, like Cameron himself, Oxbridge graduates; 16 of the 29 are, like Cameron himself, former pupils of public (i.e. expensive private) schools; 25 of the 29 are, like Cameron himself, male; 29 of the 29 are, like Cameron himself, very comfortably off, thanks so much for asking. In the circumstances, I suppose we can only be amazed and impressed that public disquiet over high executive pay, especially at the banks, has managed to penetrate the Cabinet at all.
Business representatives are aghast; well, they would be, wouldn't they? The CBI warns that the "binding shareholder votes" that Cameron seems to favour in setting executive pay would amount to "shutting the stable door after the horse has bolted", presumably with a feedbag stuffed full of crisp new tenners. The Institute of Directors darkly warns that the Government will be stepping into a legal minefield if it tries to enforce new rules, because so much executive pay is set by binding contract.
It's not hard to see why public opinion is angry over rampant rises in executive pay, at a time when "we're all in this together", in Cameron's words, and everyone is supposedly being asked to tighten their belts. From the 45% rise in CEOs' pay packages in 2010 to Sir Fred Goodwin's pension package (and another apparently looming for Sir Stephen Hester at RBS any time now), there's plenty of fuel for the fire.
The real question is whether Dave and his pal Vince can actually do much about it. Companies already have remuneration committees at board level, and shareholders already have the right to scrutinise and -- at least in theory -- vote down anything they find excessive. In practice, most institutional shareholders rarely get involved in such minutiae. Even if the government wants it to happen, it will remain very difficult for even the most dedicated activist to rally enough shareholder votes to overturn a remuneration committee's recommendations. After all, why risk alienating or even losing your best staff just to please Vince Cable?
Cameron seems to think that the answer is "transparency", a word he used repeatedly with Andrew Marr. In effect, fat cats would be "named and shamed" into accepting smaller pay packages. This sounds like a triumph of hope over experience: surely Cameron recalls how Sir Fred Goodwin fought to preserve his monster pension pot, even as his bank fell to pieces around him.
Pay inequality is not just a UK issue. Over in Canada, it was recently revealed that the CEO of Magna, the shy and retiring Frank Stronach, took home about C$ 61 million last year, seemingly without even a scintilla of shame -- and more remarkably, without any real outrage on the part of the Canadian media. Vince Cable has his work cut out for him if he wants to make any real impact -- which may, of course, be just the way Cameron likes it.
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