Cover of MoneyWeek magazine issue no 565

Searching for safety

24 November 2011 / Issue 565

Why you should stash some money in Norway

PLUS:

  • It's time to prepare for deflation
  • How to profit from the cleantech boom
  • The gaffes of football's 'Godfather'

Excerpt

It’s a matter of fairness

My old friend Heather McGregor was on Radio 4’s Today programme earlier this week. The subject was executive pay and the way in which it appears to have spiralled out of control. According to the High Pay Commission, the value of the average pay package given to executives has risen by a startling 5,000% in the last 30 years. Over the same period the average worker’s salary has risen by a mere 300% (to around £25,900). The head of HR at Cadbury’s made £3.8m in 2008.

Heather pronounced herself not much bothered by this. Executive pay is, she suggested, not a matter of what people perceive or do not perceive as fair. Nor is it of any relevance to the rest of us. It is simply a matter for the companies’ shareholders: they decide how much their executives get paid and that is that. She rounded her comments off by noting that anyone who thought that workers’ co-operatives would work better than our system should “move to Cuba”.

None of this went down particularly well. Probably for good reason. Heather is right in theory. Shareholders should control pay. They should do it because every penny paid out in salaries and incomprehensibly calculated bonuses is a penny not paid to them in dividends. They should do it because a sustainable long-term business needs happy customers and employees as well as happy executives. And they should do it because if they don’t, in the end, someone else will.

But, while that’s the theory, in practice the UK’s big shareholders aren’t doing it.

• Read the full editor’s letter here: It’s a matter of fairness.