So you think some salaries are too high? Just how high is too high, then?

I am not suggesting that £3m a year is not a lot of money..

I’d like to start this piece with two disclaimers. First, this is not intended as a justification of large remuneration packages for executives. Second, nor is it an article saying it’s right that someone earns 100 times what someone else does. But this is an article attempting to look at the other side of the debate. And it is written from a personal perspective, as an observer of the debate. This is not a headhunter trying to curry favour with their client base, or justify fee increases

We have to make a choice in this country. We either pay market-rate salaries and give ourselves the best chance of employing superb people, or we rely on extraordinary people deciding to do a job for far less than they could earn somewhere else. The only other option is to accept that paying below market rate gets us the equivalent employees. Large shareholders are comfortable with the first option.

I wrote the above in 2012. It was for an article defending Stephen Hester’s right to take a bonus where the criteria attached to it had been set three years before, where he had hit the criteria needed to trigger a bonus and where he was not receiving a full bonus because he had not hit every criteria. But people in positions of mass influence decided that this was unacceptable and we all know what happened then.

Yes, I am a headhunter writing in support of people being paid large salaries, and I know how it might look. But that does not change the fact that the first paragraph holds true. It might be worth me explaining why I believe this is so high profile now, and why taking an insular view will impact our competitiveness in the future.

I think anyone earning £1m a year or more is earning a very large amount of money. These sums are not trivial. I’m also conscious of the other argument against large salaries, namely how a banker compares with a nurse in terms of earnings and impact on society. I write this as the son of a teacher.

The challenge is that a vocational role will always be rewarded on the basis that most people doing it will do it for the bare minimum. In a capitalist world, if you can’t show the financial effect of your work, you can’t argue for a percentage of it. Again, this is an oversimplification but worth bearing in mind.

People leading businesses have always earned substantial sums of money. While there have been grumbles about this over the years, there has never been the sort of public outcry we are seeing now. So why is this? Well, I am reminded of an episode of Have I Got News For You several years ago. There was, for the time, the usual piece about MPs’ expenses.

One of the guests was Reginald D Hunter, the American comedian. After listening to the four British people on the panel for ages, he asked a few questions – the gist of which was “has this just started or has it been happening for ages?”.

Upon hearing that it had been happening for ages, he questioned whether the public outrage was a recent development. When the answer was “yes”, he basically said: “So, what you are telling me is that when everyone had enough money no-one cared about what the MPs were doing, but now the economy is in trouble, and people have less money, everyone cares?”

I feel the argument about remuneration does the same. If we are not careful we will start to hurt this county’s ability to ensure the finest people globally are running our enterprises. And that can’t be good for everyone.

But it’s when you turn to the numbers themselves that you hit an issue. Simplistically, how do you define what number is too big? You can look at multiples of the average national salary, or the average salary within an organisation. You can look at what feels morally like too big a number. Or you can make a comparison to what the prime minister earns. Or, as one Sunday paper did, to what the Archbishop of Canterbury earns. These are all arbitrary parallels. And none of them factor in that we work within a global context that continues to feel far smaller.

If we want the UK corporate world to play on a global stage and win, and offer an environment that global enterprise wants to trade with and work within, then we have to operate on that basis. That means we need a tax structure that the world is comfortable with, an employment environment businesses can work under and a remuneration system that encourages the world’s best talent to view the UK as a good place to do business in.

If you are a business person able to work globally and you are sought after, you can choose where you work and which organisation get the benefit of your experience and ability. Your first choice is likely to be a business based in the US. If you deliver, you can earn £200m over five years and be feted as a wonderful human. Your second choice is a UK-based business. If you deliver you can earn £15m over five years and be vilified in the press on an annual basis.

To be clear, I am not suggesting that £3m a year is not a lot of money. It’s a fortune. But when taken in context, against the global market place businesses work in, in the competitive world we all work in, factoring in the rewards paid to other executives in different countries, it does not look quite so outrageous.

If the large shareholders are comfortable paying global market-rate salaries, maybe its time the press and the public were, too.

Mark Freebairn is partner and head of the Financial Management practice at Odgers Berndtson

This article first appeared on economia

Photograph: Getty Images

This is a news story from economia.

Getty
Show Hide image

The SNP thinks it knows how to kill hard Brexit

The Supreme Court ruled MPs must have a say in triggering Article 50. But the opposition must unite to succeed. 

For a few minutes on Tuesday morning, the crowd in the Supreme Court listened as the verdict was read out. Parliament must have the right to authorise the triggering of Article 50. The devolved nations would not get a veto. 

There was a moment of silence. And then the opponents of hard Brexit hit the phones. 

For the Scottish government, the pro-Remain members of the Welsh Assembly and Sinn Féin in Northern Ireland, the victory was bittersweet. 

The ruling prompted Scotland’s First Minister, Nicola Sturgeon, to ask: “Is it better that we take our future into our own hands?”

Ever the pragmatist, though, Sturgeon has simultaneously released her Westminster attack dogs. 

Within minutes of the ruling, the SNP had vowed to put forward 50 amendments (see what they did there) to UK government legislation before Article 50 is enacted. 

This includes the demand for a Brexit white paper – shared by MPs from all parties – to a clause designed to prevent the UK reverting to World Trade Organisation rules if a deal is not agreed. 

But with Labour planning to approve the triggering of Article 50, can the SNP cause havoc with the government’s plans, or will it simply be a chorus of disapproval in the rest of Parliament’s ear?

The SNP can expect some support. Individual SNP MPs have already successfully worked with Labour MPs on issues such as benefit cuts. Pro-Remain Labour backbenchers opposed to Article 50 will not rule out “holding hands with the devil to cross the bridge”, as one insider put it. The sole Green MP, Caroline Lucas, will consider backing SNP amendments she agrees with as well as tabling her own. 

But meanwhile, other opposition parties are seeking their own amendments. Jeremy Corbyn said Labour will seek amendments to stop the Conservatives turning the UK “into a bargain basement tax haven” and is demanding tariff-free access to the EU. 

Separately, the Liberal Democrats are seeking three main amendments – single market membership, rights for EU nationals and a referendum on the deal, which is a “red line”.

Meanwhile, pro-Remain Tory backbenchers are watching their leadership closely to decide how far to stray from the party line. 

But if the Article 50 ruling has woken Parliament up, the initial reaction has been chaotic rather than collaborative. Despite the Lib Dems’ position as the most UK-wide anti-Brexit voice, neither the SNP nor Labour managed to co-ordinate with them. 

Indeed, the Lib Dems look set to vote against Labour’s tariff-free amendment on the grounds it is not good enough, while expecting Labour to vote against their demand of membership of the single market. 

The question for all opposition parties is whether they can find enough amendments to agree on to force the government onto the defensive. Otherwise, this defeat for the government is hardly a defeat at all. 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.