How much are you worth?

The High Pay Commission set up by Compass, due to report today, offers a valuable service in providing detailed evidence of runaway pay packages at the top, headed by Barclays’ Bob Diamond with his £6 million a year over 3 years (£115,384 per week), the new ugly face of capitalism.   But as so often with Compass, it does not adequately structure the problem and hence its solutions fall well short of what is needed.   Compass proposes: greater transparency in publishing the top ten executive pay packages outside the boardroom (how effective will that be?),  putting employees on remuneration committees (how many and with what powers?), making companies reveal the pay ratio between top pay and the company median (embarrassment is a feeble instrument), and making firms reveal total boardroom pay (again a fairly innocuous requirement).   Will all this work in drastically reducing unmerited top pay?   No.   But other measures could.

The problem to be addressed is that the two most powerful human motivators are greed and fear.   These are both highlighted in market pay under capitalism – greed to push to the maximum what one can extract from the system and fear that if one pushes too far one could make a thumping loss.   Both these constraints have been circumvented at the top end of the pay spectrum.   There is no actual maximum because there are no limiting conditions.   Bonuses are paid almost automatically, incentive schemes can be multiplied one on top of another, pension top-ups are another device to expand today’s pay packet, and ‘performance-related pay’ is granted irrespective of performance even when the share price has dived.   And fear of going to excess and losing it all has been removed by getting your chums in related companies to act as your remuneration committee, on the unspoken understanding that if they do well (extremely well) by you, you’ll do the same for them.   The system is utterly corrupt.

The real and proper answer to this problem is to set up an Enterprise Council in every major company (say, with more than 200 employees), composed of representatives of all the main pay grades from top to bottom, and require it to meet at least annually.   At that meeting the state of the company’s order book and accounts would be examined and the requirements for depreciation, investment, maintenance and all other essential purposes explained and discussed.   The residual sum available for pay increases would then be explored, and representatives would make their own bids and give their views on each others’ bids, until at least a broad consensus was reached.   That would not only constrain excessive top pay more effectively, it would also begin to generate the framework that a company is not the personal creation of the chairman, chief executive or board, but a shared enterprise of all the valued individuals within it.

 

5 thoughts on “How much are you worth?

  1. Great to hear you speak about this subject and arguing for a enterprise council to enable examination of the companies books, Surly in any good company, this is already happening , the involvement of staff and investors in the business should be an integral part of a long term successful business.

    The problem of high salaries is when this fails, and the business for what ever reason appears to be doing well for reasons not only to do with the CEO but national and global reasons.
    The main area excessive money is sometimes made by business , is one of taking advantage of cheap resources and or cheap labour,these then are taken advantage of and high rewards given to the executives , thinking that they have earned it. In fact they have just been the slave-masters and taken the rewards form the exploitation of the capitalist society.

    I have been pushing for far more wide ranging reformation of the whole economy to try to achieve the transparency and fairness we all are striving towards, That is removal of all present taxes which are highly convoluted complicated and replaced with a simpler natural resource tax collected at as near source as possible. This linked with a pay ratio of say 20:1 and a similar welfare and benefit reform of paying a wage for life instead of the existing systems.

    All these together tackle so many of the problems, credit crisis, climate change, transparency, fairness,security,and many other ails we have , whilst at the same time saving a lot of wasted energy in the administration,collection and distribution of taxes, benefits,fraud and tax evasion.

    The role of government, is to provide basic services and infrastructure, security, education and a base of housing and welfare at a most cost effective and efficient way possible.It must do this in the most efficient way possible, and if that means radical change in the way it runs its services, then that is what it must do for the long term benefit of society and future generations.

    I fell very strongly that we must act soon in this area, otherwise mankind and civilization as we know it will fall apart, we have to protect the resources for the future and at the same time ensure that we look after the present society.

    As you point out quite rightly , man is greedy , but its not just greed , it is his obsession that he forgets and does not recognize the fact that he can live on less and has this desperate need to show that he has power over other people, need also to make them fearful and envious of himself. This trait in mankind is his downfall, and it up to society as a whole to control these urges from the people who have been awarded the place of control and administration.

    I do hope you agree with me that we need to reform in a far more radical way than we have before , but must do this in a way that disseminates power and control back to the indervidual, which I believe this tax transformation would do.

    yours
    david dunn

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