A woman at a protest against banker's wages outside Chase bank in New York. Photo: Chris Hondros/Getty Images
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The head of a big company now makes more in a day than a worker on the minimum wage earns in a year

Soaring executive pay would be more ­justifiable if it reflected companies’ results. Yet the High Pay Centre report argues that this is not the case.

Cedric the pig enjoyed its moment of fame 20 years ago. The GMB trade union took the hefty hog to the annual general meeting of British Gas, whose then chief executive, Cedric Brown, had been granted a 71 per cent increase in pay and benefits, including a £475,000 salary: around £800,000 in today’s money.

Though the stunt failed (Brown kept his cash), the outcry over his package and other instances of excessive pay for bosses led to reforms in corporate governance. Two main principles for executive compensation were established. First, levels of pay should be set by remuneration committees that include independent non-executive directors. Second, earnings should be linked to the company’s long-term performance. Besides a salary, a typical chief executive’s package has an annual bonus and a long-term incentive plan (LTIP).

The result of the changes has been a huge surge in pay. A report by the High Pay Centre think tank in May showed that in the late 1990s the average FTSE-100 CEO took home roughly £1m. In 2014, that figure was £5m. Each of these bosses now earns roughly £20,000 every working day: one and a half times as much as a minimum-wage, 40-hours-a-week worker makes in a year.

Soaring executive pay would be more ­justifiable if it reflected companies’ results. Yet the High Pay Centre report argues that this is not the case. Between 2000 and 2013, bonus payments at the UK’s top 350 listed companies increased at twice the rate of earnings per share and company profits, two of the main metrics used to compute payouts. For LTIPs, it was even worse: little more than a quarter of the annual change in payments to executives could be attributed to a rise in earnings per share or total shareholder return in any year in the ­decade to 2013. “The net result is that CEO pay growth has dramatically outpaced pay increases across the wider economy, without any corresponding increase in company performance,” the report concludes.

Other data confirms the ever-widening pay gap between bosses and the rest of the workforce – not just the lowest-paid. It is a trend that is fuelling the debate about the “1 per cent” and inequality. The research group Incomes Data Services recently calculated that a FTSE-100 chief executive is paid 120 times more than an average full-time employee, up from 47 times in 2000. Compare this to the ratio of 20:1 that the American management consultant and writer Peter Drucker once said was the limit before a firm experienced employee resentment and decreased morale, or the paper, published last year by Chulalongkorn University’s Sorapop Kiatpongsan and Harvard Business School’s Michael I Norton, which showed that Britons thought the “ideal pay ratio” for chief executives to unskilled workers was 5.3:1.

So, it is little surprise that people from across all sectors of business agree that the current model of executive compensation is broken. At one end of the spectrum is the TUC, which argues that the concept of performance-related pay is fatally flawed because it is impossible to measure fairly an individual’s impact on a large company. At the other end is the Institute of Directors, whose opinion may be even more damning, considering its status as the “independent association of business leaders”.

The IoD’s director general, Simon Walker, said at the launch of the High Pay Centre report that “routine excessive pay has become too common in Britain” and that there is “a strong case for wholesale reform”. Even those who helped force through the corporate governance changes in the 1990s concede that the system has not worked as intended. David Pitt-Watson, who led the shareholder engagement activity at Hermes Investment Management, which manages £30bn, and who is now an executive fellow at London Business School, told me: “It is a very big problem that we can observe little correlation between company success and high pay.”

Why has it gone so wrong? Remuneration committees, whose members may be independent but are also often part of the high-pay club, must take some of the blame. Large shareholders, too. As in Cedric the pig’s time, protests from minority shareholders have little effect if the biggest stakeholders – the handsomely paid fund managers who hold our pension money – do nothing. Last year, a majority of shareholders in only one FTSE-100 company – Burberry, whose new boss, Christopher Bailey, had received shares worth nearly £20m and a pay packet of up to £10m a year – voted down a chief executive’s pay.

Besides wasting shareholders’ money, excessive performance-related ­compensation can damage a company’s prospects – and the economy. Many LTIPs pay out after three years, which encourages executives to push up profits hastily and, as a result, to limit investment that would yield benefits in the longer term, according to the economist Andrew Smithers. This, he believes, is why the UK’s labour productivity is so poor compared to that of other G7 countries.

So what can be done? Among the High Pay Centre’s recommendations are abolishing LTIPs, broadening the range of company-specific targets used to calculate bonuses and improving diversity on remuneration committees. Pitt-Watson’s suggestion is even more radical.

“Should we not rather be saying: let’s give you a good salary and a ‘normal’ bonus of 15 or 20 per cent, rather than one of five or six times the salary? Surely we want to create a society where the CEO is a respected person and acts in the company’s best interest, without the need of some huge payment to ensure they are doing their job well?”

Xan Rice is features editor of the New Statesman

Xan Rice is Features Editor at the New Statesman.

This article first appeared in the 11 June 2015 issue of the New Statesman, Who owns the future?

The University Challenge final. Photo: BBC iPlayer
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Why University Challenge is deliberately asking more questions about women

Question setters and contestants on how the show finally began to gender-balance its questions – and whether it’s now harder as a result.

University Challenge has long had a gender problem. When the show first started airing in 1962, some Oxbridge colleges were still refusing to admit women as undergraduates; in the decades since, women have been consistently outnumbered by men, with all-male teams still a regular occurrence. Those women that did appear were all too regularly criticised and objectified in equal measure by audiences: notable contestants like Hannah Rose Woods, Emma Johnson, Samantha Buzzard and Sophie Rudd have experienced intense media scrutiny and criticised the sexism of the show and audiences. In recent years, sexism rows have dogged the show.

How satisfying, then, to see two women carrying their teams in last night’s final: Rosie McKeown for winners St John’s, Cambridge, and Leonie Woodland for runners-up Merton, Oxford. Both secured the majority of points for their teams – McKeown with visible delight, Woodland looking unsure even as she delivered correct answer after correct answer.

But there is another site of sexism on University Challenge, one that earns less column inches: the questions. Drawing on all areas of history, science, language, economics and culture, the questions often concern notable thinkers, artists, scientists, and sportspeople. Of course, our society’s patriarchal hierarchies of achievement have meant that the subjects of these questions are mostly men. General knowledge is, after all, a boys’ club.

Over the course of this 2017-8 series, though, I noticed a shift. More women than ever seemed to be making their way into the questions, at times with deliberate reference to the inherent sexism of their lack of cultural prominence. On 5 February, there was a picture round devoted to female composers, with contestents asked to identify Clara Schumann, Ethel Smyth, Rachel Portman and Bjork from photographs, who, Paxman explained, are all “women that are now listed in the EdExcel A Level music syllabus after the student Jessy McCabe petitioned the exam board in 2015.” Episodes have included bonus rounds on “prominent women” (the writer Lydia Davis, the pilot Lydia Litvyak, and the golfer Lydia Ko), “women born in the 1870s and 80s” (Rosa Luxemburg, Elizabeth Arden and Vanessa Bell), and the female philosophers Mary Midgely, Philippa Foot and Iris Murdoch.

Elsewhere, questions raise a knowing eyebrow at the patriarchal assumptions behind so much of intellectual endeavour. A music round on famous rock bands quoted the music critic Kelefa Sanneh’s definition “rockism”: “the belief that white macho guitar music is superior to all other forms of popular music”. Another, on opera, quoted Catherine Clement’s Opera, Or The Undoing of Women, which explores how traditional opera plots frequently feature “the infinitely repetitive spectacle of a woman who dies”. “Your music bonuses are three such operas,” Paxman said dryly, to audience laughter.

University Challenge’s questions editor Thomas Benson confirms that there has been a deliberate attempt to redress a gender imbalance in the quiz. “About three years ago, a viewer wrote in to point out that a recent edition of the programme had contained very few questions on women,” he explains. “We agreed and decided to do something about it.”

Last night’s final included a picture round on artists with works concerning motherhood (Mary Casatt, Lousie Bourgeois, Leanora Carrington and Frida Kahlo) and a music round on Marin Alsop, the first woman to ever conduct the Last Night of the Proms, as well as sets of bonuses on the American writer Willa Kather and Byzantine historian and princess Anna Komnene.

Former winner Hannah Rose Woods is delighted by the increase in such questions. “I think it’s fantastic!” she tells me. “These things are really important in changing people’s perceptions about women in the past, and the way women’s contributions to science and the arts have often been written out of history. We need to keep challenging the idea of the White Male Canon.”

Last night’s winner Rosie McKeown says that while she didn’t necessarily notice a deliberate attempt to gender balance the questions, she was “very pleased with the quality of those questions that did come up”.

“Although it wasn’t in one of our matches,” she tells me, “I thought the picture round on female composers was especially good for highlighting women’s achievements.”

For all the enthusiasm for these questions, in the studio they’re often met with blank stares. While University Challenge questions are broad and imaginatively posed, there are some reliable revision topics and techniques: from Nobel laureates and the years of their wins to identifying famous paintings and classical music excerpts. McKeown says she has been a religious viewer of the show since she was 11 years old, and admits to watching reruns of the show to prepare. Shift the kinds of answers you might be looking for, and teams may struggle.

“Do we know any female British composers?” Leonie Woodland said weakly, looking at a picture of Ethel Smyth. Trying to come up with a female Muslim Nobel laureate, one contestant desperately suggested Aung San Suu Kyi. Asked to provide a first name linking an American concert pianist with the sister of Lazarus one male contestant still buzzed in with “Daniel”.

“Even if we didn’t always get them right,” McKeown tells me, citing that round on female philosophers, which saw them pass on every question, as an example, “it was great to see so many important female figures represented.”

“I don't think the questions about women necessarily affected our performance, but it’s certainly a very good thing that they were there and I hope that they’ll arouse people’s interest in the women featured and in their achievements.”

Benson believes that it hasn’t had a significant effect on performance. “The great majority of the questions that feature women are no different to any others, in that they sit firmly within the realm of standard academic general knowledge.”

He notes that they often refer to historical and background details, citing sets of bonuses on Canadian novelist Ruth Ozeki and British physicist Hertha Ayrton, which both teams answered correctly in full. “Though Ozeki and Ayrton may not be household names, the questions are definitely answerable and deal with central themes in their work and achievements.”

It’s easy to brush off the significance of a fairly geeky Monday night BBC quiz show, but University Challenge still regularly pulls in three million viewers. In any case, a show like University Challenge has a cultural significance that outweighs its viewing figures. It helps to shape our understanding of which subjects are intellectual or important, which are history’s most notable achievements, and who is worth learning about. To ignore questions of identity is to risk intellectual laziness, relying on tired ideas of canonical figures – or worse, supremacist propaganda, privileging the achievements of white men over all others.

Quite aside from making for less predictable and more enjoyable television, by including questions on the likes of Stevie Smith, Nella Larsen, Gertrude Stein, Myra Hess, Margaret Mead, and Beryl Bainbridge, University Challenge can diversify the mental encyclopaedias of its viewers, be it a tweed-wearing 60-year-old in Leamington Spa or an 11-year-old like Rosie McKeown with her own dreams of one day competing. It has a responsibility to do so.

Anna Leszkiewicz is the New Statesman's deputy culture editor.