New Internationalist

How to get a handle on excessive pay

This May Day, as thousands of people spill onto the streets and squares of continental Europe, the cries of dissent in Britain seem to be petering out a bit.

I set about wondering why. It may be because, to date, austerity and unemployment are hitting other countries harder. You could say our continental brothers and sisters have a more colourful history of protests. British activists are – unsurprisingly – drained, and after today, probably damp. People on the streets of Athens may not be feeling quite as wet after sticking it to the man in 24º Celsius sunshine.

But Britons still have more than enough to be angry about. Along with cuts, phone hacking and the Olympics, another important story has been boiling over this year. This story flies in the face of the job losses and stagnating wages that are affecting ordinary people. It defies the Eurozone crisis and the double dip recession, and sees the bosses of Britain’s biggest companies – many of them household names – take home increasingly excessive pay packages while failing to give shareholders the return they expect.

The graph above shows the rise and rise of the pay of CEOs from the FTSE 100. The gradient stands out in comparison to a rather modest rise in average pay and even the FTSE 100 index itself. The graph exposes the myth that executives need sky-rocketing pay packages to keep British companies performing strongly.

In other words, not only are ever-climbing CEO pay packages unfair, they are also bad for business. These booming sums not only waste money that could otherwise be used to increase the dividends paid to shareholders, they also compromise the success of the company: if executives are so well paid for mediocrity and even failure, there is little financial incentive for them to succeed.

This is bad news for the many people whose pension pots and savings depend on the performance of FTSE 100 companies. The shareholder rebellion at Barclays AGM last week was a good example of how institutional investors are beginning to question how poorly performing companies are spending their money. But ultimately when pension funds and ISA providers vote on pay packages at company AGMs they are doing so on our behalf. The custodians of our pension pots are the ones who are voting on these pay packages – it’s our money and it’s time we put a stop to spiralling CEO pay.

Now we at FairPensions have come up with a way to help ordinary people make their voice heard with Your Say on Pay . The campaign site allows you to lobby your pension provider direct, and urge them to vote against ‘rewards for failure’. The last few months have seen a remarkable display of anger at the company bosses pay and now we can actually do something about it.

While cities across Europe teem with would-be revolutionaries this May Day, we’re asking Britons to take action while staying dry. We want to see thousands of people breaking down the barriers between them and the boardroom and letting it be known that they have had enough.

Have Your Say on High Pay

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  1. #1 Angus 01 May 12

    Is the data in the graph smoothed into a linear trend? I find it hard to believe there was a perfect linear increase from 1998. It could also do with some labels on the vertical axes. It's a nice idea to visualise the FTSE 100 index as a measure of CEO performance alongside CEO salary, but it's a little rough around the edges.

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