What shoulod be done when in the last year company profits are down 31%, the stockmarket is down 35%, everyone else has to take a pay cut or a job loss, yet executives can award themselves a huge rise in pay and bonuses? The hot answer is that we need a High Pay Commission to deal with top pay like the Low Pay Commission supervises the minimum wage (currently £200 a week, compared with the average salary, bonuses, stock options, and other ‘incentive’ schemes of chief executive of the top FTSE 100 companies amounting currently to £71,500 a week). But fixing the minimum wage at £5.83 per hour at the bottom of the wage structure is a wholly different matter from regulating top pay. Unless it is proposed to limit top pay (including all the non-salary far more lucrative forms of remuneration) to a fixed ratio with bottom pay in the organisation, say no more than 15-20 times the lowest wage, which a High Pay Commission could certainly do and then keep under permanent review, a lot more is required than setting up a new quango.

What would its powers be? Would it have the statutory authority to limit unreasonable pay awards which breached published guidelines, or would it be merely advisory? If it were the latter, would the Government act on its findings in blocking excessive pay deals, and if so, what exactly would be the nature of the statutory powers that enabled it to intervene in remuneration packages across the piste on a routine basis? How could statute be drafted in a manner, given the very different circumstances prevailing in different companies in different industries and services, that both efficiently and equitably traded off incentives versus fiarness and balance within the company as a whole?
Without denying that a High Pay Commission would be useful in systematically monitoring excessive pay awards and establishing alternative benchmarks for reasonable pay based on skill, effort and expertise, a far better route for actually implementing fairness in pay would be by instituting new procedures within each firm itself. A firm’s success or failure doesn’t depend just on the chief executive or the boardroom at the top, but on the quality and effectiveness of teamwork throughout the whole organisation. Each large company (say, with over 500 employees) should therefore be required to set up an Enterprise Council composed of a representative of each main employee grade within the organisation.
It should meet at least 2-3 times a year to discuss and scrutinise the firm’s strategy, and at least once a year that should include the distribution of pay and all other forms of remuneration throughout the firm. The chief executive and directors, along with all the other grade representatives, would therefore have to justify their pay bids to their colleagues. Pay claims would then be subject to negotiation, not with mutually back-scratching remuneration committees or with absentee or complacent insistutional shareholders, but with colleagues most fully aware of the mutual contribution of each. With one FTSE 100 boss (Bart Becht of Reckitt Benckiser) now paid 1,374 times the pay of his average employee, there can be no better way of re-introducing a measure of sanity into executive pay.

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