The current economic crisis has seen a number of scapegoats for faltering growth. Bankers are a given. More recently it has been benefit claimants, "coasting" employees and employment red tape. As we
The current economic crisis has seen a number of scapegoats for faltering growth. Bankers are a given. More recently it has been benefit claimants, "coasting" employees and employment red tape. As we have seen over the weekend, with the CEO of RBS rejecting a bonus worth nearly £1 million, the current favourite bugbear is executive pay.
All three main political parties are lining up to set out their plans to stem rising executive pay. Whilst their solutions differ (a bit), Peter Mandelson's view 15 years ago that he was "intensely relaxed about people getting filthy rich" could not be more out of fashion.
We have now seen Vince Cable set out the Government proposals. The problem is…..well, defining what the problem is appears to be part of the problem! Vince is evidently uneasy with some "fat cats" receiving significant pay during this time of austerity. However, he, along with nearly all other politicians, falls short of suggesting that it is the actual pay level which is the problem.
Instead, the attack on executive pay is termed as an attack on "mediocrity". It is not that executives receive too much money, but too often this is payment for failure. Perhaps Vince is after all intensely relaxed with the filthy rich, so long as they also create opportunities for others?
There are no proposals for radical regulatory frameworks as to what executives should be paid, punitive tax or Government monitoring of pay in order to address this issue of mediocrity. The solution proposed instead is a number of measures aimed at encouraging shareholders to challenge unreasonable/undeserved executive pay.
Will this work? The announcement has coincided with the furore surrounding the bonus awarded to the CEO of RBS. Commentators have already questioned the effectiveness of shareholder monitoring of pay if the Government's own ownership of companies appears to have so little influence. Ordinary shareholders often only hold a short term investment in any company and have little interest and perhaps understanding of corporate governance. What chances would they therefore have of keeping executive pay in check?
Undoubtedly, it is easy to see injustice in high executive remuneration when low paid employees are facing pay freezes and redundancy. However, the stomach is clearly not there in any of the main political parties to introduce radical regulatory frameworks to monitor and limit executive pay.
The popular demand for action on executive pay is strong. In such a climate, inevitably politicians want to seem to be doing something. The banking crisis saw some dramatic failures by people who had previously received large bonuses. However, there seems little reason to believe that Vince Cable's current tinkering with corporate governance would have made, or will make, much difference.
All three main political parties are lining up to set out their plans to stem rising executive pay. Whilst their solutions differ (a bit), Peter Mandelson's view 15 years ago that he was "intensely relaxed about people getting filthy rich" could not be more out of fashion.
We have now seen Vince Cable set out the Government proposals. The problem is…..well, defining what the problem is appears to be part of the problem! Vince is evidently uneasy with some "fat cats" receiving significant pay during this time of austerity. However, he, along with nearly all other politicians, falls short of suggesting that it is the actual pay level which is the problem.
Instead, the attack on executive pay is termed as an attack on "mediocrity". It is not that executives receive too much money, but too often this is payment for failure. Perhaps Vince is after all intensely relaxed with the filthy rich, so long as they also create opportunities for others?
There are no proposals for radical regulatory frameworks as to what executives should be paid, punitive tax or Government monitoring of pay in order to address this issue of mediocrity. The solution proposed instead is a number of measures aimed at encouraging shareholders to challenge unreasonable/undeserved executive pay.
Will this work? The announcement has coincided with the furore surrounding the bonus awarded to the CEO of RBS. Commentators have already questioned the effectiveness of shareholder monitoring of pay if the Government's own ownership of companies appears to have so little influence. Ordinary shareholders often only hold a short term investment in any company and have little interest and perhaps understanding of corporate governance. What chances would they therefore have of keeping executive pay in check?
Undoubtedly, it is easy to see injustice in high executive remuneration when low paid employees are facing pay freezes and redundancy. However, the stomach is clearly not there in any of the main political parties to introduce radical regulatory frameworks to monitor and limit executive pay.
The popular demand for action on executive pay is strong. In such a climate, inevitably politicians want to seem to be doing something. The banking crisis saw some dramatic failures by people who had previously received large bonuses. However, there seems little reason to believe that Vince Cable's current tinkering with corporate governance would have made, or will make, much difference.