Cameron to put fat cats on crash diet

Returning to Number 10 today, the PM has made it clear that curbing top pay is his New Year resolution.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013

From new wealth taxes to HMRC clampdowns on tax avoidance, Cameron has the super-rich in his crosshairs. The public indignation over the government's 'We're all in this together' line versus headlines concerning gaping tax loopholes and underhand dealings, and the fact that the mega-wealthy have so far proved impervious to Britain's austerity measures, have forced the PM's hand. He has vowed to make economic fairness his number one priority for 2012.

Executive pay is not a new issue, of course. When MT attended the CBI Annual Conference in November, one topic took centre stage: the pay packets of high-level directors. CBI director-general John Cridland gave the assembled business leaders a stern lecture on the importance of maintaining social and moral credibility during times of trouble: ‘At its worst the impression of business is one of greed or selfish indulgence,’ he said. ‘People feel wronged.’

The following day, the High Pay Commission revealed that the pay of FTSE 100 directors had skyrocketed 49% to an average of £2.7m. This announcement was set against the backdrop of the Chancellor’s austerity measures and swingeing public sector cuts, driving an even greater wedge between industry and the British public.  

With Cridland’s words ringing in our ears - ‘The endeavours that generate value must be fairly and more transparently rewarded – with extra reward for real success, not for doing what we are already paid for – and certainly not reward for failure.’ – a new problem presented itself. How do you ensure that businesses adhere to a fair policy over pay in the absence of legislation? And is it really up to government to enforce these checks and balances?

Two months down the line, and government is still struggling over whether to introduce cast-iron regulation. There are a number of options on the table: to allow shareholders a final vote on remuneration; to give employees and shareholders seats on company boards in order to make decisions on pay fairer; even to force companies to publish pay ratios between top directors and staff on the shop floor/production line.

As we speak, business secretary Vince Cable is compiling a report into possible resolutions for the executive pay problem, with findings due to be published at the end of January. Bank bonuses will be doled out this month, so the research could not be more timely. In the meanwhile, Cameron is taking a hard line, calling for an end to ‘grossly excessive top pay awards’.

One thing is certain, the days of couching vast pay packets and bonuses in technical language, deep in the small print of annual reports are over. The public gaze – like the Eye of Sauron – is focussed on executive pay. Firms that fail to adapt to the requirements of today’s financial mood may find themselves paying a very dear price indeed.
 

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