One Direction vs a FTSE 100 company - which is more "grossly immoral"?

Surely Vince Cable wouldn't take a swipe at a fellow tousle-haired scamp like Harry Styles.

Vince Cable’s swift denial of claims that he attacked the pay of One Direction in a debate yesterday was a great bit of crisis aversion. After various commentators claimed that he’d responded to a question about the boyband’s alleged £5m per member pay packet with an attack on their "grossly immoral" earnings, aides were quick to clarify that he’d misheard the question. He was talking about the issue of executive pay.

The jury’s out on whether he actually knew what he was saying or not, but it’s easy to get confused between the band and a FTSE 100 company. Both One Direction and WPP, for example, were created by a sinister orange puppet master for the purpose of world domination. For my part, I think it unlikely Vince would want to take a swipe at a fellow outspoken, tousle-haired scamp like Harry Styles.

The point is it doesn’t matter. Whether the line was a smokescreen or a clarification, it was the right choice, and that is infuriating. The British public (or at least that rabid segment of it represented on Twitter) seemed satisfied with Cable’s explanation. Attacks from directioners are disappointingly few. So why are we happy to indiscriminately lash out at the inflated pay packets of the suits while letting the quiffs keep their cocaine summer houses and personal fleets of ice cream trucks?

It’s true that executive pay is an important issue. According to the FT, the median pay of a FTSE 100 chief exec has risen 266 per cent since 2000, while that of the average worker has risen a mere 40 per cent. Perhaps this direct and rather alarming comparison between the pay of CEOs and those of us at the bottom makes anger easier to come by.

While last year’s "shareholder spring" was a step in the right direction - a third of FTSE 100 CEOs who have disclosed their salary for 2013 have frozen their pay -  this year may be quieter. Despite outspoken opposition from Standard Life’s Guy Jubb, BP’s remuneration report passed last week with 93 per cent of shareholders in favour. 

However, there is a qualitative difference between the pay of a pop star and the pay of many executives. One Direction’s pay is, more or less, reflective of how much money they bring in for their label and management. Doubtless, they do this well, and they deserve to see much of that money. However, a Chief Executive generally has additional considerations knocking around his or her less photogenic head. As Jonathan Guthrie pointed out last week, BP’s Bob Dudley has to meet objectives in thirteen categories to get his bonus. One of them is "upstream major project delivery". Surely the man deserves a few thou for even knowing what that means.

The concern is that CEOs are being dragged into bash a banker hoo ha hour - post-crisis Britain’s favourite entertainment show. If the main swell of the pay debate ceases to be conducted along reasonable lines, CEOs won’t listen even to reasonable objections. Many of them earn too much, and few if any of them have the bewitching charm of Zayn Malik, but we should acknowledge that CEOs do a complicated job, and remuneration needs to account for that in a manner which is satisfactory for both sides.

Photograph: Getty Images

Josh Lowe is a freelance journalist and communications consultant. Follow him on Twitter @jeyylowe.

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Brexit has opened up big rifts among the remaining EU countries

Other non-Euro countries will miss Britain's lobbying - and Germany and France won't be too keen to make up for our lost budget contributions.

Untangling 40 years of Britain at the core of the EU has been compared to putting scrambled eggs back into their shells. On the UK side, political, legal, economic, and, not least, administrative difficulties are piling up, ranging from the Great Repeal Bill to how to process lorries at customs. But what is less appreciated is that Brexit has opened some big rifts in the EU.

This is most visible in relations between euro and non-euro countries. The UK is the EU’s second biggest economy, and after its exit the combined GDP of the non-euro member states falls from 38% of the eurozone GDP to barely 16%, or 11% of EU’s total. Unsurprisingly then, non-euro countries in Eastern Europe are worried that future integration might focus exclusively on the "euro core", leaving others in a loose periphery. This is at the core of recent discussions about a multi-speed Europe.

Previously, Britain has been central to the balance between ‘ins’ and ‘outs’, often leading opposition to centralising eurozone impulses. Most recently, this was demonstrated by David Cameron’s renegotiation, in which he secured provisional guarantees for non-euro countries. British concerns were also among the reasons why the design of the European Banking Union was calibrated with the interests of the ‘outs’ in mind. Finally, the UK insisted that the euro crisis must not detract from the development of the Single Market through initiatives such as the capital markets union. With Britain gone, this relationship becomes increasingly lop-sided.

Another context in which Brexit opens a can of worms is discussions over the EU budget. For 2015, the UK’s net contribution to the EU budget, after its rebate and EU investments, accounted for about 10% of the total. Filling in this gap will require either higher contributions by other major states or cutting the benefits of recipient states. In the former scenario, this means increasing German and French contributions by roughly 2.8 and 2 billion euros respectively. In the latter, it means lower payments to net beneficiaries of EU cohesion funds - a country like Bulgaria, for example, might take a hit of up to 0.8% of GDP.

Beyond the financial impact, Brexit poses awkward questions about the strategy for EU spending in the future. The Union’s budgets are planned over seven-year timeframes, with the next cycle due to begin in 2020. This means discussions about how to compensate for the hole left by Britain will coincide with the initial discussions on the future budget framework that will start in 2018. Once again, this is particularly worrying for those receiving EU funds, which are now likely to either be cut or made conditional on what are likely to be more political requirements.

Brexit also upends the delicate institutional balance within EU structures. A lot of the most important EU decisions are taken by qualified majority voting, even if in practice unanimity is sought most of the time. Since November 2014, this has meant the support of 55% of member states representing at least 65% of the population is required to pass decisions in the Council of the EU. Britain’s exit will destroy the blocking minority of a northern liberal German-led coalition of states, and increase the potential for blocking minorities of southern Mediterranean countries. There is also the question of what to do with the 73 British MEP mandates, which currently form almost 10% of all European Parliament seats.

Finally, there is the ‘small’ matter of foreign and defence policy. Perhaps here there are more grounds for continuity given the history of ‘outsourcing’ key decisions to NATO, whose membership remains unchanged. Furthermore, Theresa May appears to have realised that turning defence cooperation into a bargaining chip to attract Eastern European countries would backfire. Yet, with Britain gone, the EU is currently abuzz with discussions about greater military cooperation, particularly in procurement and research, suggesting that Brexit can also offer opportunities for the EU.

So, whether it is the balance between euro ‘ins’ and ‘outs’, multi-speed Europe, the EU budget, voting blocs or foreign policy, Brexit is forcing EU leaders into a load of discussions that many of them would rather avoid. This helps explain why there is clear regret among countries, particularly in Eastern Europe, at seeing such a key partner leave. It also explains why the EU has turned inwards to deal with the consequences of Brexit and why, although they need to be managed, the actual negotiations with London rank fairly low on the list of priorities in Brussels. British politicians, negotiators, and the general public would do well to take note of this.

Ivaylo Iaydjiev is a former adviser to the Bulgarian government. He is currently a DPhil student at the Blavatnik School of Government at the University of Oxford

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