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.

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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.