Is it better to rip lots of people off and give some of your gains to charity – or better to rip no one off in the first place? You’d think, if pushed, that the Church would go with the second. So I’ve been waiting for its leaders to say something about pay in the financial sector.
After all, while the idea that making money and morality are perfectly compatible is easily argued, it isn’t so easy to make a moral case that excuses the ludicrous levels of executive pay in the financial and big corporate sectors. People have tried (think Stephen Green and Philip Richards) but in the end the fact remains that if you overpay a fund manager you rip off investors and if you overpay a CEO you rip off shareholders.
So I was pleased to see that, albeit rather late in the day, the Church of England, which manages a £5.3bn investment and property portfolio, has finally stepped up to the plate. It has announced, says the FT, that it will no longer support pay schemes where top managers get more than four times their salary in bonus. Why? “Because people should be paid what they are worth but not more than that.” And right now many packages go beyond “what is either required or equitable”.
That sounds about right – is it equitable that Bob Diamond of Barclays got total bonus and incentive awards of £8.8m – 35 times his salary – in 2010? Of course it is not – it represents no more that the ongoing effect of the talent myth.
The fact that the Church is not impressed by pay isn’t going to have an immediate effect – they aren’t invested everywhere and their stance leaves the time-honoured option of simply raising base salaries to make the final numbers just as high as ever.
But their intervention might (I hope) mean that the tide is beginning to turn. It is under quiet discussion across the financial industry and this week someone possibly more influential than the Church on this kind of thing has had a go.
Stephen Peak of Henderson has publically criticised the £1.3m goodbye bonus given to the outgoing CEO of fund management group Gartmore. He is he says “staggered” and “incandescent” at what is a “clear reward for failure”. The official line on this is that Jeff Meyer got his bonus as reward for his part in readying the company for sale (to Henderson as it happens…). But as Ian King points out in today’s Times, and as I have pointed out time after time, this kind of thing is surely part of a CEO’s job description anyway. It is “part of his regular duties rather than something that qualifies him for a discretionary bonus”.
And on most other measures few people – shareholders in particular – would be likely to think that Meyer is entitled to a penny of cash beyond his basic salary: Gartmore floated a year ago at 220p a share but the takeover valued it at 92p a share. A job not particularly well done. Perhaps he should have been fined, not paid more. Peak says that Andrew Skirton, the outgoing Gartmore chairman who approved the payment, should “hang his head in shame.” He is right – he should. And more people should say so.