Thursday, December 28, 2006

Take away the executive pay...

Top bosses' salaries 'race away' according to the TUC. While us citizens are apparently 6% better off since 2000 when taking inflation into account, top bosses salaries have doubled in the same period.

I'm sure the usual cadre of right wing bloggers will point out that in fact taking x,y or z into account the actual figures are 6.74% for the citizens and that bosses have merely had an 89.7% increase. They'll then no doubt start arguing about restrictions on entepreneurs and how people should be free to earn as much as they like.

I don't believe that British business has become twice as productive in the last 6 years, so how exactly is it justified? This is abuse of power, and in this citizen's opinion the explanation for it lies not in economics but in sociology.

In a large FTSE company, renumeration for a small group of people is not limited by the real world factors, there is no actual market pressure on wages. Executive pay tis judged according to what other executives earn, as this has risen, it has resulted in what seems to be a competition to keep up. It is this pychological competition that hat has driven wages up, rather than any demand for the skills that our executives possess. It is this sociological effect that the government will need to counteract in order to put a lid on exective pay.

citizenandreas [at] slick47 [dot] co [dot] uk

5 comments:

Praguetory said...

"There is no actual market pressure on wages"

There is a market pressure - international competition. Although British companies may not have got twice as competitive the international shortage of quality managers has worsened. Have you seen what Western managers are paid in China? We're talking telephone numbers.

Citizen Andreas said...

Apologies for being a little generalised, it's quite comm when us lefties bitch about wage differences. It depends in my opinion on the high paid role in question.

A common argument deployed by us is that there appears to be little demand internationally for our directors and high level executives, I don't remember the stat but I believe very few get jobs outside the UK.

The example you quote refers to a group of people with a very specific set of skills (experience of industrial quality management processes, good grasp of mandarin, willingness) willing to make sacrifices (relocating to China).

The skills required for executives in the UK are much harder to pin down to specifics, making it harder to make the kind of rational judgement that a market needs to function effectively. This combined with the fact that money is generally freely available and the fact that these people have complete control over their renumeration I feel is the cause of the problem.

Praguetory said...

Just putting a different view forward. Did you manage to check out Peter Wilby's article in the Grauniad. It was intentionally provocative, but I think he meant it. I hardly agreed with a word, myself.

Citizen Andreas said...

I did indeed, it's interesting, definitely procative and the comments as is often the case on CiF make very entertaing reading.

I was far more impressed by this one in the Times, this comes a good deal closer to my concerns.

Praguetory said...

I'll bookmark it thanks. Also, thanks for the mention on your next post. Hope it provokes an interesting debate.