Inflated Salaries...

[CogitoErgoSometimes]

... of £millions/year don't raise an eyebrow when paid to premiership footballers, actors, authors or the stars of TV shows, but are not acceptable for the directors of a successful company. Why?

The mast majority of Director salary/bonus/pension are totally undeserved. It is out of control and a small group of interconnected Directors sitting on each other's Boards have no incentive to limit it. They effectively set their own salaries.

The major problem here is that members of the public that ultimatley own the shares of stock market listed companies have no power to modify or limit Directors salaries.

If the public had that power I am sure that the public at large would have voted against these salary rises. The reason that we 'the public' have so little power is because of the way that voting at a company Annual General meetings takes place.

The large instititional fund managers who manage the vast bulk of people pensions rarely vote against the salaries of Directors because the managers of our pensions also earn vast salaries (ie they work in The City) so they do not want to draw attention to that issue. If an institution does not vote its shares the Chairman of the company can vote those shares as he sees fit - which is usually in favour of higher salaries for Directors.

Even people who have a PEP/ISA that they manage themselves are not allowed to vote against Director salaries in the companies they own shares in because the shares are held in a nominee account.

The very small number of private shareholders that own shares directly in FTSE companies often do vote against the Director salaries but the number of shares thay hold is so small that the vast block of unvoted institutional share holdings under the control of the Chairman just swamps their vote.

One thing that would help a lot is to only allow votes that have actually been cast to be used to vote on Directors salaries. Also to allow PEP/ISA holders to vote. In other words get rid of the institutional block vote of shares unless thay actively vote their shares.

'So you were lying about footballer's salaries, then - you're quite happy about them'

Lying? I have said I am happy with them all allong.

'I can always smell out a load of old bllcks when I read it.'

I can imagine. You've had lots of practice, reading the stuff you write.

'It would appear to be a rare talent to clean a hospital properly'
???? Why is that?

'Claig, is it actually education you don't like winning out over innate intelligence/cunning?'

No, I think education is fantastic and should be free to all of the public. That's why I disagree with people who can afford to send their children to Fettes, Westminster and Eton, creating a system where ordinary people will have to pay up to £9000 a year to go to university.

' I guess all forms of education are attempts to control the way the masses think as much as they are pathways to more advanced thinking'

You may guess that, but I disagree. I don't think that progressive spin is education.

How many directors of FTSE 100 companies earning these "fat cat" salaries are there? Probably just a few thousand, maybe only a few times more than the number of BBC, publicly paid, employees earning over £300,000.

It's a distraction from the real problem of how public money was used to bail out banks and of the cuts being made to the public's benefits and lifestyle. And the distraction is being promoted by elite millionaires who went to top fee-paying schools and have spent little time working for FTSE 100 companies which create employment and wealth for ordinary people.

How many directors (as opposed to non-executive directors) of our great FTSE 1000 businesses went to Eton? I bet it is less than 5. There are probably more Etonians in the Cabinet than in the top echelons of our industries. That's because industry is a real meritocracy. Privilege counts for little because it doesn't earn money. It is skill and talent that are rewarded, just like the skill of Carlos Tevez.

How many directors of our top FTSE 100 companies went to Oxbridge? Probably a smaller percentage than the number of Guardian journalists.
That's because business is a meritocracy.

And I think Eton and Oxbridge are great places that the whole country should be proud of. But I don't agree with progressives holding ordinary people back, telling them what they can earn or deflecting their attention from the real issues.

claig, did you or did you not mean the following:

"The CEO is resposnsible for thousands of employees and has to compete in the market against other companies. I think the CEO deserves a far higher salary than Bono. Should the CEO be penalised and their salary be less than Bono's or Jonathan Ross's just because they do the good thing of providing employment for a low-paid trainee?" That really sounds to me like you do want to fiddle with salaries on the basis of what you believe is right and proper. In the same spirit, one could ask why should the hospital consultant be penalised and their salary be less than Jonathan Ross's, just because their services are essential for sick people and Jonathan Ross's services are essential for nobody? Why should running an essential service hold your and your company's profits back?

As for directors of FTSE 100 companies, it would be extremely interesting to see how many of them actually did go to comprehensive school, rather than private school and Oxbridge. I wonder where the statistics are? Same with the City - it's stuffed full of bankers, lawyers and accountants who went to private schools and Oxbridge. That's one of the reasons why Cameron and his ilk kowtow to them so much - they speak the same language and dip in and out of each others' pockets.

And as for hospitals not being cleaned properly - I can only assume it's the lack of a colossal bonus for not killing everyone off that makes it so difficult. Why bother to work hard doing something properly if you don't get a fair reward? Clearly a hospital cleaner is a failure in capitalist terms before they even start, because they are working in a profitless, thankless job and ought to have higher aspirations.

'That really sounds to me like you do want to fiddle with salaries on the basis of what you believe is right and proper.'

No, you are thinking like a progressive. I don't want to fiddle with anybody's salary. I don't care what Bono earns - in fact he deserves it because he sells records to millions of people, just as Tevez deserves his salary because millions of people tune in to watch him play. However, when the public is paying for people out of our taxes, then I think we have the right to say "hold on" and that is why I think it is right for us to ask questions about BBC salaries. I am against gravy trains paid for by the public.

It's got nothing to do with how essential a service is. The fire brigade is a fantastic, essential service, but they don't get paid what Bono or Tevez earn.

I bet you are wrong about the FTSE directors. In business, it's about talent, not privilege. Not all politicians are privileged either. Margaret Thatcher was an ordinary grammar school girl, clever enough to go to Oxford. I bet the CEOs of BT, Glaxo etc. are people like her rather than toffs with a silver spoon in their mouths. That's why real social mobility is so important. It means that skill and talent rise to the top and is not prevented from succeeding by privilege. It is the skill and talent of the nation that ends up helping the entire nation, and it is our FTSE 100 companies that also help our nation be prosperous.

'Why bother to work hard doing something properly if you don't get a fair reward?'

Because people are not progressives. They don't have a sense of entitlement. They are proud of doing a good job and serving the community and their biusinesses whatever they do. Have you never seen how minimum wage employees work hard, turn up in all weathers and do a great job? They aim to progress, to create a better life for their children. to provide a great education and opportunities for their children. They don't have a sense of entitlement, they weren't born with a silver spoon in their mouths, they struggle to make things better. And they don't envy Carlos Tevez or Margaret Thatcher or any other person who worked hard and achieved their dream. They all want the American Dream. That's what drives them on. They know there is a brighter future around the corner.

'Clearly a hospital cleaner is a failure in capitalist terms before they even start, because they are working in a profitless, thankless job and ought to have higher aspirations.'

Nobody is a failure in capitalist terms. That is progressive thinking again. Some people work two or three jobs. Some people have been made bankrupt or have been laid off and are now working in lower paid jobs than they were before. But none of them are failures. They work hard to provide a better future. They have high aspirations and work towards them. They are not as fortunate as progressive journalists who went to Oxbridge and earn huge salaries for knocking out columns, but that doesn't mean that progressives should look down on them.

claig - what you've just written goes against what you wrote earlier:

"Let's not forget that wages act as an incentive. They are one of the factors that drive and motivate people to go that extra mile. How many people would bust a gut and put the extra hours in if the reward was relatively small? Our dynamic, capitalist society produces so many innovations that improve people's lives due to competition and incentives."

'How many people would bust a gut and put the extra hours in if the reward was relatively small?'

It doesn't go against it at all. The rewards and incentives are what provide hope. Everybody looks forward to their pay increases. They hope to earn more in the future. That's why they spend years studying at night school, while holding down a day job. They expect higher rewards in the future. That is the incentive that drives them on. But, if the rewards are slow in coming, that doesn't mean that they decide not to do a good job at whatever they do. They are proud people and they want to do a good job, whatever it is.

But nobody is stupid. Nobody will work 80 hours a week if there are no rewards for it. Our capitalist society offers the prospect of great rewards, and some people will sacrifice their time in order to achieve those rewards. Without those rewards, they would not be as dynamic and innovative and therefore would not help society as much as they could. You only have to look at the difference in standards of living in communist and capitalist countries to see that this incentive makes a difference to effort.

But, when we get a society in which there are no rewards and where people see that however hard they try, they cannot progress, then people lose hope. That is why it is wrong to charge people fees to educate themselves and progress. When people see their lifestyles going into reverse and their benefits being cut and their services being reduced, they start asking questions about what is going on and who is responsible.

That's when they start asking questions about why their money was used to bail out private banks, and that's when the progressives step in and say "look at the salaries of directors", in order to stop people asking the real questions.

Ooh, yes, I've noticed how proud everyone is to be working hard for their boss's pay rise. There's lots of signs of pride in this all round the world as we speak. Obviously, only the people at the top of the pile work harder if they get bigger rewards as a result. The people at the bottom work hard regardless of the rewards, because they are proud. It's a shame people lose their sense of pride as they move up.

Of course they don't lose their sense of pride as they move up. They are human beings just like you. They may not be as progressive as you, but they are just as good people as you, some possibly even better.

'How many people would bust a gut and put the extra hours in if the reward was relatively small?'

That is exactly why the progressive Big Society crap was a flop. It doesn't understand people, It takes the piss out of people. It expects ordinary people to turn up at their village halls and mop the floor and pick up litter for nothing, and tells them that that is charity. It shows Warren Buffett giving money to charity and says "there you are, why don't you do the same?"

The public know they're being conned by the elite, who can well afford their charitable deeds. But the public aren't stupid, they won't work for nothing. They want some of the rewards that the elite get.

The elite tell them to be more charitable, but the public say "haven't we been charitable enough? We've already bailed the billion dollar banks out. What more do you want? Blood?"

'A big mistake is to think that because the protesters tend to be youthful it follows that they should be treated like children. Richard Chartres, the Bishop of London, has made that error by suggesting to the campers that they ought to leave in return for a debate under the dome of St Paul's ? gosh, thanks my Lord Bishop. He further asks them to go on the grounds that: "I am involved in ongoing discussion with City leaders about improving shareholder influence on excessive remuneration."

Voila. Now we know why the BBC, the progressives and the Establishment are all reporting the news about directors' salaries at this point in time.

It is to deflect public attention from the real issue of bank bailouts and to placate the protestors by offering them a sop, wringing of hands about the pay of a few thousands individuals in our FTSE 100 companies (not even in our banks).

www.guardian.co.uk/commentisfree/2011/oct/30/andrew-rawnsley-occupy-protesters-grown-up

And why have they all picked on our FTSE 100 companies? Because they know that the public won't believe them about bank salaries and bonuses.

We witnessed all the wringing of hands and promises to curb the bankers already, and what came of it?

So now they have to pick on the FTSE 100 companies - the very people who we need to create employment and get out of the mess caused by the bankers.

And what's next?

After the public sees that the ongoing discussions with the City about improving shareholder influence on excessive remuneration fails, who will they pick on then?

They will pick on the public. Tell them that their remuneration is too high and that their benefits and services need to be cut. But unfortunately, this time their actions won't fail.

It's not the politicians who have exposed the fat cats' undeserved pay packets. It's Income Data Services - independent researchers.

People will work hard without having to be given the carrot of megabucks - just a fair wage - if they enjoy what they are doing and have a sense of purpose. Clearly the fat cats don't actually give a stuff about their jobs, that's why they have to be bribed with what they call 'compensation' - as if they are doing everyone a favour by turning up.

It's interesting that some posters are ok with JK Rowling or Rooney earning large sums - because they can easily see the value they bring to their life. But it's less easy with a nameless, faceless business director.

Maybe greater transparency of pay levels & in particular - the ratio between top pay and bottom would help.

If consumers feel strongly about executive pay levels - they can boycott those companies who pay their executives the most. Unless of course they feel the products or services are worth it.

Well, exactly, edam.

It seems to me that salary incentives only work to a certain point. Go beyond that point and what you get instead are people who could happily mess up big time and not really care, because they will still get a lovely big pay off to go away and live on their luxury island in peace for the duration of their long retirement. The incentives should be directed more towards the people who will actually be incentivised by them, rather than the people who have enough incentives to do a good job already.

I Think what is getting people worked up at the moment jackstar is that there doesn't seem to be any accountability. They make loads of money for their company, they get large rewards, fair enough, but it's the fact that even if they fuck up they get large rewards, that just doesn't seem right.

If Rooney or JK Rowling fuck up then they don't make as much money, that's the difference.

trixy- Well I'm all for accountability. Executives are supposed to be accountable to their share-holders. But if that isn't working, then accountability to the consumer seems another option.

Also, it's worth remembering that the IDS research is based on FTSE 100 companies only. They are, by definition, the most successful and largest companies. If the research had included a larger sample (say, by including companies who had dropped out of the top 100) I suspect the results would have been different.

trixy- Well I'm all for accountability. Executives are supposed to be accountable to their share-holders. But if that isn't working, then accountability to the consumer seems another option.

Also, it's worth remembering that the IDS research is based on FTSE 100 companies only. They are, by definition, the most successful and largest companies. If the research had included a larger sample (say, by including companies who had dropped out of the top 100) I suspect the results would have been different.

jackstarb - you make a fair point about including companies that had dropped out of the FTSE as there may well be a suvivorship bias in the data.

However, what I think really sticks in people's throats is that top pay (ie Directors of FTSEe companies and City bankers) has gone up so much relative to the economy, corporate earnings and the pay of the other 99% of the population.

It is the disproportionate nature of it, even as the economy suffers these people are grabbing a bigger and bigger share.

I used to be a City trader, my DW a stockbroker. We buy and sell shares for a living. I believe in capitalism but this is absolutely wrong. It will destroy society if politicians dont get a grip of it. Problem is they look to join the gravy train on leaving office too so they won't.

Fair reward for hard work and skill and investing your own money and takinga risk is fine. Unwarranted reward totally unconnected to work or skill and even reward for failure (ie bankers on bonuses of millions in failed banks) is not right at all and society is saying enough is enough.

Just remember there is one immutable law regarding pay scales:

Those at the bottom need reductions in terms and conditions together with below inflation or no pay rises for the good of the greedy scum at the top company

Those at the top need big rewards and bonuses to do their job properly. Can you imagine the reaction to a cleaner who said "sorry but I need a bonus to do my job to the best of my ability".

My favourite was Bob Diamond who stated that the austerity policies are needed to get the country out of the mire. My question is what the fuck has it got to do with him as he is an American citizen and it's a bit rich coming from a greedy piece of shit someone on £8 million. I bloody hope he gets a fatal and agonising disease that all his money cannot cure.

MoreBeta - it's rather difficult to see what any government can do, at least directly, apart from legislating for greater transparency. and setting a good example with public services.

It might be useful to understand why and how it's happening. I really don't think the 'greedy bosses, grabbing themselves big salaries' line of thought is particularly productive. Though I accept that puplic ranting makes some people feel better (including politicians).

The Thatcher administration managed to legislate to bring down the unions so I done see why this shower cannot legislate to control corporate greed, high level salaries and bonuses, where there is a will there is a way or maybe they don?t want to "hurt" their mates.