The inequality between business leaders and their workforce has now reached an all-time high. According to the pay consultancy Manifest/MM&K, the typical FTSE-100 chief executive is now paid £4.7 million a year (over £90,000 a week), whilst the typical FTSE-100 employee gets 143 times less. This is the average position, which means there is a considerable range of outliers around this mean. Whilst the ratio is capped at 75:1 in the case of John Lewis and 65:1 at TSB bank (still very sizeable differentials), the inequality at the other end of the spectrum runs off the scale. The boss of mining company Rangold Resources was paid £84,600 last year, no less than 1,500 times the wages received by his African mining workers. Even in companies located in Britain, the inequality is vast, and growing. Sorrell, boss of the WPP advertising firm, took home nearly £577,000 a week last year (paying himself, in effect, nearly £30 millions a year), some 780 times the pay of his average worker. Lord Wolfson, boss of Next, took home £88,500 each week last year, 459 times the average pay of his shop-floor staff.
This has nothing to do with merit. There is no rationale or justification for differentials on this scale. It is purely a question of power. Whilst all other people’s pay is regulated either by collective bargaining or by employment contracts, the pay of this tiny coterie at the top (not the top 1%, nor the top 0.1%, nor even the top 0.01%, but the top 0.001%) is effectively determined by themselves. The chief executive invites his friends and counterparts at other FTSE-100 companies to join his boardroom remuneration committee, but leaves the room when his pay is being discussed so as not to influence their deliberations! And his collaborators have plenty of opportunity to inflate the largesse they offer because base pay is a very small part of the total package, being swamped by such goodies as long-term incentive plans, stock options, swelling pension pots, golden cuff-links, and other exotic creations.
So what should be done? Governments under the current neoliberal orthodoxy are either too feeble or too timid to interfere with the scandal of bosses’ pay. They won’t lay down a path to return to the 47:1 differential that still prevailed (even after a decade of Thatcherism) in 1998, let alone to the 25:1 range of the 1980s. It is only real transparency plus the requirement of justification to the company workforce who are all contributors to the overall company performance that will steadily bring down these grotesque excesses to the level of what is defensible. Why doesn’t Labour shout this from the rooftops? It would go down extraordinarily well with the growing mass of disgruntled voters.