The Hester award is far from the only case of greed out of control. It is now clear that the City, which has been lobbying hard against a weak government to ensure that any financial re-regulation is minimalist, believes that the way is now open to resume stratospheric remuneration and bonuses in the temple of Mammon. Barcap, the investment arm of Barclays, is now looking to exceed even last year’s record payments to Bob Diamond of £27m and Roger Jenkins allegedly £40m. Earlier this month Shell proposed £3.6m share awards to 5 top executives, including the chief executive van der Veer, even though the group had failed to meet the targets on which the payments were conditional. It raises two questions. Who decided these payments? And how can this slide into avarice be controlled?

The awards are decided by remuneration committees, basically the chief executive’s chums. Pay is still determined in Britain strictly along class lines. Working class wages are either at the mercy of the market or collectively bargained by a trade union, though Thatcher’s highly restrictive labour legislation has seriously weakened this power. Middle class salaries are fixed by individual contracts which can in some circumstances be more negotiable. Boardroom salaries are altogether a more intimate and cosy affair where pay hoists awarded by carefully picked members of the remuneration committee fraternity will of course be rewarded when their turn comes in the annual cycle of salary inflation. The Old Boys’ network not only survives, it has far bigger leverage than ever before. It is this rigged pay market that urgently needs reform. What Britain needs is the abandonment of this anachronistic class-based pay system, and its modernisation by pay scales based on agreed criteria that apply across the whole range of incomes from top to bottom.
How might that be done? A Pay Commission is needed to draw systematically on the substantial assemblage of data that already exists analysing incentives and their impact on human behaviour, and then to draw up broad weightings for the various bases for reward – organisational, technical and managerial capability, intellectual qualification, leadership skills, innovative working, to name but a few. On this basis broad guidelines could be constructed that would act as exemplars for pay determination acriss the whole organisation. They would not in any sense be binding, but gross discrepancies would have to be justified, either to colleagues representing all main grades brought together in an Enterprise Council, or, particularly in the case of top pay in the financial sector, to the regulatory authority.
Such a system will of course be bitterly resisted by those who worship at the altar of unlimited greed and who will accept no check other than self-regulation. But we have already had that system for 30 years and it has produced the biggest bust in market capitalism since the Great Depression. Half measures will not do, like recent suggestions to extend the period before bonuses could be claimed till 3 years or more (but that does not remove the recklessness in risk-taking), or institutional investors’ reluctance to sanction the more egregious examples of avarice (too arbitrary and infrequent), or imposing challenging conditions on massive incentive schemes (though even they fail, they are still often paid out). The tragedy however is that it requires a Government that is ready to stand up to the City, and neither New Labour nor the Tories will do any such thing – indeed they will both go to considerable lengths to block any such move. So, any support for bricking a few more windows like Sir Fred Goodwin’s at his home in Edinburgh?

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