Pay matters for normal employees, not CEOs

Good on Barclays and Citigroup, but we need to focus on the pay of all employees, not just those at

Stories about shareholders challenging the size of CEO pay deals have been prominent in this week's business pages. Barclays have hurriedly amended the terms of Bob Diamond's bonus in the hope of avoiding the sort of embarrassment that Citigroup suffered when a majority of their investors rejected Vikram Pandit's remuneration package. 

In recent years, investors have been widely criticised for failing to address excessive executive pay, and while their current spate of activity is welcome there is strong evidence that they alone are incapable of systematically addressing the problem. Also, while investors (and companies, commentators and policy-makers) are now having serious conversations about executive pay, they are neglecting other problems around pay in the private sector – problems which have serious impacts on the company performance as well as on the wider economy and society. 

Articles about the pay of company CEOs are now common in, but there are far fewer stories about the pay of the wider workforce. The disproportionate focus on a tiny minority of employees is not confined to the media. Companies' annual reports are obliged to talk about pay at the top, but there is no such requirement with regard to pay at the bottom or middle. (Vince Cable recently rejected the idea of obliging companies to report on the ratio between CEO pay and that of a typical employee). This being the case, it is hardly surprising that investors engage very seldom with companies about wider workforce pay.

Companies, investors, commentators and policymakers frequently talk about the (probably incorrect) assumption that pay at the top must motivate executives by linking big rewards to company performance. There is far less talk about the correlation between narrow pay dispersion and improved company performance, or the detrimental effect of excessively low pay on the productivity, attendance, retention and mental health of low and middle ranking employees. Ignoring the wider workforce may suppress the performance of the wider company, but too often the pay of anyone outside the higher echelons is seen as a cost rather than an investment.

But investors (and policymakers) should also consider how workforce pay affects the wider economy. The CBI recently claimed that allowing minimum wage to fall behind inflation comes as "a relief" to "many hard-pressed firms", but forgets that many firms are hard-pressed because low-paid workers have little money to spend in the local economy. Excessively low pay also externalises huge costs to the taxpayer, either supplementing wages through benefits (about £6bn a year, according to the IFS) or meeting the social costs associated with in-work poverty.

Some investors have realised that companies have employees beyond the boardroom. Traditionally these have been ethical investors, whose actions may have been motivated more by ethics than investment, but some more mainstream investors (such as Hermes & NAPF) and commentators (such as the share centre) are now beginning to talk about the need to consider top pay in relation to workforce pay.

Beyond a few pioneers, shareholder interest in pay "beyond the boardroom" is pitifully limited. Hopefully investors themselves will take more of an interest in the business case for whole-workforce pay policies, but if their engagement with the issue of excessive executive pay is any thing to go on, that will take a very long time. We need both the media and policymakers to take a lead, by ensuring that the conversations they have with business leaders are not disproportionately about those business leaders.

Our businesses, economy and families need to move away from model that often appears to regard top pay is a matter of motivation and everyone else's pay as a matter of cost. If we do not move away from such a model, the economy will remain unnecessarily sluggish and brutal.

Cutting Bob Diamond's salary may bring the 1 per cent down, but does that help the 99 per cent? Photograph: Getty Images

Duncan Exley is the director of the Equality Trust

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How the Brexit referendum has infantilised British politics

Politicians like Boris are not characters in a fantasy show. If they aspire to high office then they must be held to high standards. 

Ancient Greece is the cradle of modern Europe.  From its primordial soup emerged so much of our culture, our language and our politics. Of the three, it seems to be the politics that has made the least progress over the centuries. In fact, if you dropped an Athenian into the middle of politics in the UK today, they would find themselves right at home. This is not because of the direct democracy, the demagogues or the xenophobia, though all are worryingly familiar, but because of the style of the debate itself.

To understand politics in ancient Greece you have to grasp that they had no concept of ‘the truth’. This is not to say that they were liars, simply that the framework by which we judge credibility was not one they would have recognised. The myths and legends that dominated their discourse were neither thought of as being ‘true’ or ‘made-up’, they simply were, and the fact of their being known allowed them to be used as reference points for debate and argument.

Modern politics seems to be sliding back towards this infant state, and nothing embodies this more than the childish slanging match that passes for an EU referendum debate. In the past six years the UK has had three great exercises of direct democracy and it is safe to say none of the campaigns have added a great deal to sum of human enlightenment. Who remembers the claims that babies would die as a result of the special voting machines needed to conduct AV elections? But the EU referendum has taken this to new extremes. The In campaign are executing what is a fairly predictable strategy, the kind of thing that is normal fare in politics these days. Dossiers of doomsday scenarios. Experts wheeled out. Statistics embellished to dazzle the public. One can question the exact accuracy, but at least you feel they operate within certain parameters of veracity.

What is happening on the Out side, in contrast, is the collective nervous breakdown of a large section of the political establishment. Just this week we have had Penny Mordaunt, a government minister, flat-out denying the UK’s right to veto new accessions to the EU. We have seen the fiercely independent Institute for Fiscal Studies denounced as a propaganda arm for Brussels. Most bizarrely, Boris Johnson even tried to claim that the EU had banned bananas from being sold in bunches larger than three, something that nobody who has actually visited a shop in the UK could possibly believe. These kind of claims stretch our political discourse way beyond the crudely drawn boundaries of factual accuracy that normally constrain what politicians can do and say. Surely the people peddling these myths can never be taken seriously again?

But they will. You just watch as Johnson, Mordaunt and the rest slide effortlessly back into public life. Instead of being ridiculed for their unhinged statements, they will be rewarded with plush offices and ministerial cars. Journalists will continue to hang on every word they say. Their views will be published in newspapers, their faces will flit ceaselessly across our TV screens. Johnson is even touted as a plausible future leader of our country, possibly before the year is out. A man who over his meandering career seems to have held every possible opinion on any topic you care to name. Or rather, perhaps it is more accurate to say that the character we call Boris has no opinions at all, simply interests. The public, who have scant regard for a political class they believe to be untrustworthy, seem to have taken a shine to a man who is perhaps the most fundamentally dishonest of Westminster’s denizens.

What does all this say about the state of our politics? If it is true that we are seeing the advent of ‘post-truth’ politics, as some have argued, then it has grown out of the corrosive relationship between politicians and the public. It is both a great irony and a great tragedy that the very fact that people distrust all politicians is what has permitted the most opportunistic to peddle more and more outlandish claims. Political discourse has ceased to be a rational debate with agreed parameters and, like the ancient Greeks, more resembles a series of competing myths. Claims are assessed not by their accuracy but by their place in the grand narrative which is politics.

But the truth matters. For the ancients it was the historian Thucydides who shifted the dial decisively in favour of fact over fiction. In writing his Histories he decided that he wanted to know what actually happened, not just what made a good story. In a similar vein British politics needs to take a step back towards the real world. Broadcasters launching fact-checkers are a good start, but we need to up the level of scrutiny on political claims and those who make them. At times it feels like the press operate as a kind of counterweight to Game of Thrones author George RR Martin, going easy on much-loved characters for fear of upsetting the viewers.

But politicians like Boris are not characters in a fantasy show. If they aspire to high office then they must be held to high standards. If politics is the art of the possible, then political discourse is the art of saying what you can get away with. Until there are consequences for the worst offenders, the age of post-truth politics will continue suck the life from our public debate.