Marginal productivity is for the other guy

["Ian Murray" <seamus2001@xxxxxxxx>]

Anger at boom in executive pay

Call for government action as unions and investors condemn effects of
top bosses achieving 28% rises

Jill Treanor and David Gow
Thursday August 30, 2001
The Guardian

Unions, powerful City investors, and company directors united
yesterday to round on the boards of FTSE 100 companies after the
Guardian-Inbucon survey revealed Britain's top bosses enjoyed 28% pay
rises last year.

Union leaders urged the government to appoint at least two employee
representatives to the secretive committees determining company
directors' pay, while Ruth Lea, head of the policy unit of the
Institute of Directors, warned these same committees against
"remuneration ratcheting" by rubber stamping wage rises.

The powerful body which represents all the major pen sion funds, the
National Association of Pension Funds, said the 28% jump - some six
times higher than the average pay increase - appeared to flout City
rules set to standards for corporate behaviour.

The rules call for these remuneration committees to be "sensitive to
the wider scene...including pay and employment conditions when
determining annual salary increases".

Chris Baldry, manager of the NAPF's voting issues service, said:
"There will be general concern about the numbers the Guardian has
unearthed. The figure seems very high and doesn't seem to comply with
the combined code (which sets City rules)." Several unions are also
dismayed by what they see as the failure of the government to crack
down on so-called boardroom excesses, despite a raft of promises to
force companies to link pay to performance.

"Ministers talked tough and the reality is that nothing has happened,"
a senior trade union official said.

The government has said it would require companies to allow
shareholders to vote each year on the pay policy. Yesterday, sources
at the Department of Trade and Industry would only say the situation
was being reviewed.

John Monks, TUC general secretary, who is struggling to devise a
common TUC front on the issue of public services between outright
opponents of privatisation and the "modernisers", believes the growing
gap between boardroom salary packages, irrespective of merit, and the
"rest" of the workforce is seriously damaging companies' morale and
will spill over into debates at next month's TUC congress.

Public service unions, already planning an assault at the congress on
plans for partial privatisation of key services such as education and
health, were outraged.

Dave Prentis, leader of Unison, the biggest public service union,
said: "How much longer can fat cat bosses justify these huge pay and
perks while millions of workers are denied a decent living wage?"

Calling for remuneration committees to have employee representation to
compel companies to justify pay packages to annual general meetings,
Mr Monks said: "Fat cat pay shows no signs of letting up".

Ms Lea contrasted the rise in the boardoom with the IoD's surveys,
which showed the majority of all company directors - not just those in
the FTSE 100 - saw pay rises of just 4%. She said: "I think
remuneration committees do have a tendency to look at the median
earnings and say 'Our chaps are better than the average and need
higher than the median'." Some questioned whether the threat of a
downturn would stem boardroom pay.

Michelle Edkins, corporate governance director at Hermes, which
manages BT's pension fund, said: "It will be interesting to see
whether recession drives pay down. But in recessions, you will still
need strong executives".

But Sir Ken Jackson, Blairite leader of the AEEU engineering union and
a supporter of public service reforms, sounded a different note.
"Where performance merits competitive levels of pay, then we support
companies rewarding their workers at all levels, including the
boardroom."