100% Salary bonuses v's HUGE Public Service, NHS, Police cuts

[littlemisslost]

Equalitarian society really is a utopian dream, although I dont agree with some of these big mouth union bully bosses I do wonder how we can deal with these huge and unjust inequalities. It seems we have learned and dealt with nothing after the crash

The John Lewis partnership is probably a good coporate model for restraint. As I understand it, the CEO is not allowed by the company articles to earn more than 80x the pay of the lowest paid employee, and all employees are partners which means that if the company does well they all receive a bonus. More companies might take up the model if there were tax breaks or other incentives.

As for cuts, that's a different matter. Employees in the private sector are subject to 'cuts' frequently as directors balance income and outgoings, hiring and firing as appropriate. The public sector can't be immune. NHS spending is apparently 'ring fenced' (big mistake as it implies the system runs perfectly) and the effectiveness of policing has less to do with the number of coppers and more to do with the cooperation of the public, systems and practices.

'ring fenced' NHS is a load of rubbish Im a nurse and seeing cuts everywhere units and beds being shut down and patients put in danger because there are no beds for them so have to be nursed in the community totally inappropriately!

I agree John lewis has some good practices but the fact that any executive can earn up to 80 x the lowest paid employee is prety shocking, even the lowest paid employee is playing their part in that companies success so 80 x is very excessive

yes public services have to make balances yearly and yes there is/has been alot of waste in the public sector but I'm not sure the cuts are happening in the right place ??

If private companies, most of them not banks, are making a profit and their bosses meet the requirements of their contracts then what is wrong with paying bonuses?

Remember that more than half of the FTSE350 companies have not paid their executives pay rises for the last two years.

Meanwhile the Government would have gone bust a long time ago if it were a private company. It's paying out far more year on year than it receives in income.

It has to do something to balance the books, which is going to be the reduction in public services which are bigger now then they ever have been despite the Government's financial short fall every year.

Finally those private companies are the ones that the Government is relying to get back onto their feet so as to boost the tax that they pay into the Government coffers.

Pointlessly hammering the companies that make this country tick out of some perceived notion of "social equality" is just going to damage them, drive down the tax revenues and result in having to make even harsher cuts in the public sector.

"'ring fenced' NHS is a load of rubbish"

No it's not, it's very real and very controversial.

However what it does mean is that the NHS is getting the same amount of money to spend (well I think it might actually be getting more), how it's spending it and whether it cuts spending on one portion of it's services to spend on another is nothing to do with the "ring fencing" of the budget as a whole.

"More companies might take up the model if there were tax breaks or other incentives."

Right now the Government can't afford tax breaks to encourage companies to do something that is perceived as helping social equality rather than helping income go up or spending go down.

the banks are totally to blame for the crash people are adults are take on loans, mortgages and gamble with their circumstances by choice and it was a mutual responsibility not to loan and not to apply for things you cannot legitimately afford.

The NHS may have the same overall budget but the demands on it are ever increasing as is obesity, mental illness, fetrility problems, prevously virtually eradicated diseases are resurfacing and it is crippled under the cheap and nasty comepensation culture we have become. Many thousands of good drs and nurses are leaving the country everyday and unskilled, foreign and underqualified staff ( not all foreign I might add) are being used to fill the gaps putting patients at even more danger.

SORRY I meant the banks are NOT totally to blame!

In John Lewis, no-one can earn more than 75 x more than the lowest paid person in the organisation.

This is peanuts compared to the pay of some other large companies whose CEOs get millions plus lovely fat bonuses. It's nice they value themselves so highly while relying on the taxpayer to top up their workers on minimum wages via benefits and tax credits.

"This is peanuts compared to the pay of some other large companies whose CEOs get millions plus lovely fat bonuses."

If a private company can make profits and afford to pay their bosses large amounts of money then what's the problem? The company pays taxes on it's profits and the bosses in particular will also be paying lots of tax.

And it's that tax that then allows the Government to then spend money on public services.

As said above if you start attacking those companies out of some twisted sense of "social equality" then they'll either pay less tax or give up and move abroad and end up paying no tax.

Right now when we've allowed this county to become so utterly dependant on one industry, financial services, who have no real physical reason to remain here other than convenience then we do that at our peril.

Littlemisslost - why do you think 80x the lowest worker is excessive? What sort of rate would you prefer to see?

Obviously even 80x the pay is a product of an immensely unequal class society. Does someone need a house 80 times the size of another, 80 times as much food? Oh but of course, they need to pay school fees etc to perpetuate the iniquities. Absurd. I long for revolution.

While I largely agree with Badgerpaws and also strongly believe we have no choice in making public sector pay and job cuts I also strongly believe that pay at the top of private firms/banks is out of control and will cause social tension and unrest in the end.

Me and DW invest in shares and bonds for a living and we take a lot of time looking not just at comany profits but also at the ethos of a company and the behaviour of the management team and how they are paid before we invest.

We routinely vote down managment pay packages that are unwarrented but our votes (along with other activist investors) are not a big enough majority to force excessive executuve pay down. The big investing institutions usually abstain with their votes or just vote with management at the AGM.

The truth is that private sector bosses get 200 - 500 x multiples of the lowest workers salaries because they can and not because they are worth it or produce stellar profits for shareholders. There is no effective control. Unfortunatley this phenomenon has now infected the upper echelons of the public sector too. It is even worse in America which is one of the most unequal societies in the World.

The John Lewis model is a good one. Me and DW also consistently note that publicly listed companies where the founder has a large personal stake are most likely to have the smallest difference between chief executive salary and the average worker (although not in all cases). They often tend to be very good companies to invest in as well.

Changing voting rules for shareholders so private people with small shareholdings in PEPS/ISAs could vote and that only those votes that are actually cast count would make a big difference in curtaling executive pay I think. Society at large has to have a say. We all own large firms through our pensions, PEPS/ISAs and we should have a proper say in what the managers get paid and how they behave and how they run their companies. We do with politicians so why not the top manager sof firms. After all, large firms have a big impact on all our lives.

Having worked in a city business district and being involved in bonus distribution - I think most would be completely shocked at the level and determination of bonuses. Also as to the often sexist nature of their distribution. Poor performance gets rewarded time and time again.

One company awarded their top earning staff absolutely huge bonuses midway through a year (to hide it) all the while knowing very well that that at the end of this year they would be making redundancies.

Ofcourse many top management are not worth what they get paid - it is just ridiculous.

They try build arguments that they could move companies - but IMO only a very few could effectively move.

IMO it becomes a club and once you reach those earnings you can usually just tick along, collecting the cash.

"I also strongly believe that pay at the top of private firms/banks is out of control and will cause social tension and unrest in the end."

But what exactly can be done about it?

The only real option is, as you say, to get the Shareholders of the Company to do something.

But the problem is that if the management at Company A are not being paid as much as the management at other companies then they will up sticks and move.

Or if the Government tries to do something and impose a wage ceiling then you risk whole companies moving to countries where such things don't exist.

And that latter one is a particular risk for the UK. We've allowed ourselves to become utterly dependant on the financial sector when it comes to both jobs and giving money to the Government through various taxes.

That financial sector is really pretty mercenary and doesn't really have any physical ties to a location. Those aspects were what enabled us to lure them to London and Docklands in the first place.

Those same issues will also enable them to move overseas if the going gets tough here. Other countries will offer them the tax breaks and pay freedom that they want and they'll go.

We'll then loose the last major industry left in the UK and then the Public Sector will really be in trouble as tax revenues collapse. And that's also why the banks were allowed to get away with behaving as they did, we've become dependant on them.

"Morals" and fighting an "unequal society" are all well and good but when your society depends on business more than that business depends on you and there are other countries who are more than keen to accept those businesses then you need to be careful.

Of course one thing the public could do would be to give companies that offer an "ethical" pay structure an economic incentive.

There's nothing stopping any of us only shopping at John Lewis, for example, or only banking with someone who offers their executives a similar pay limitation.

Big companies can only offer big pay because they're profitable.

The Government doesn't have to do anything and nor do shareholders.

Is that likely to happen?

I think not.

Most people put saving their money before ethics, as most companies put making money before them too.

Badgerpaws - again I broadly agree with what you say.

However, if shareholders were given more power then I think that across the board all senior managments would be under more scrutiny and pressure - hence if the management at Company A came under scrutiny and had their pay cut they would not gain an advantage by moving to Company B. I do not buy the arguement that all senior executives would move overseas either and even if they did they would still have workers here and still provide employment.

Yes we did become too dependent on The City. It became the UK version of the economic phenomenon known as the Dutch Disease where an economy becomes so dependent on a single natural resource that its entire economy and politcal system becomes swallowed up by it. It was N Sea Oil in the 1970s and then The City in the last 20 years.

I am not sure on the figures but I read somewhere that once the bailouts and tax write offs have been taken into account the largest financial firms in The City will have paid very little tax over the last decade. We would not lose much if they changed their notional business location - as long as they continued to run their physical operation from the UK.

"However, if shareholders were given more power then I think that across the board all senior managments would be under more scrutiny and pressure"

But when the public as consumers won't put ethics before savings then why would the public as consumers put ethics before returns as investors?

The board will say "if you allow us to pay £x to CEO Bob then he'll stay with the company and we'll make more money for you, if you don't he'll leave and you'll make less money" and which way would the Shareholders go?

I'm not arguing against improved Shareholder power but just that I don't think that we should expect the public to behave any differently.

"I am not sure on the figures but I read somewhere that once the bailouts and tax write offs have been taken into account the largest financial firms in The City will have paid very little tax over the last decade."

I've heard the opposite.

As is the financial sector pays about 20% of the total income of the Government.

And in terms of purely balancing the books the banks should make the Government a profit, I think that one of them has already repaid the money it took to bail it out.