Stakeholders argue over executive pay

It seems that this debate isn’t going to go away, which will surprise few of you. At a time when the economy is struggling, unemployment is rising and living standards are stagnant, why is one group in society getting so much wealthier? One pressure group, calling itself the ‘High Pay Commission’ (they are obviously trying to draw parallels with the government’s own Low Pay Commission) is in the news for publishing a report describing high executive pay as ‘corrosive’.

Recent blogs have covered this topic with a case study on stakeholder conflict and executive pay at Burberry, whilst another pondered the rise of a new international breed: the super-rich. But this isn’t ‘new’ news – it’s a story that has been building for 30 years.

The pressure group’s year-long inquiry found that the pay of top executives at a number of FTSE companies had risen by more than 4,000% on average in the last 30 years. Finding from the report include reference to the CEO of Barclays. It said he earned £4,365,636, which was 169 times more than the average worker in Britain today. It equates to an increase of 4,899.4% since 1980, when the top pay at Barclays was £87,323 and just 13 times the UK average.

The government’s own Business Secretary, Vince Cable is quoted by the BBC. He said, “It’s not right that we have the situation that’s been happening over the last decade where we have vast extreme awards paid on completely unrelated to the performance of companies. And that’s not good for the consumers, it’s not good for people who own the companies, it’s not good for the people who work for them, and that’s really got to be addressed.”

However, business leaders typically respond by saying that the UK has to be competitive with the rest of the world. “If we want great people to come and work in the UK, given it’s a global talent pool, we’ve got to be prepared to pay the amount of money that those executives can get elsewhere in the world.”

High Pay Commission chairwoman Deborah Hargreaves (who has an article in the Guardian) said: “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, does not reflect company success and is fuelling massive inequality, it represents a deep malaise at the very top of our society. The British people believe in fairness and, at a time of unparalleled austerity, one tiny section of society - the top 0.1% - continues to enjoy huge annual increases in pay awards.

What do you think? Which stakeholders win – and who loses – from massive pay rises for those at the top of organisations? You might want to read the Guardian article for its coverage; the BBC link also contains a video clip.