Are chief executives overpaid?

We all know that the answer is a resounding ‘Yes’. Bob Wylie says a new book gives trades unionists stonewall arguments for our case.

Are chief executives overpaid is a good question. We can start with the house builder Persimmon. A couple of years ago the government set up the “Help to Buy” scheme to assist first-time buyers and boost house building across the UK. A mini-boom in building followed.

Last year it became clear that the chief executive of Persimmon, one Jeffrey Fairburn, was due to trouser £120m as a result of the bonus scheme he and his boardroom pals had set up following the “Help to Buy” offer. The top 100 managers at Persimmon will share a £300m pot, in addition to Jeffrey’s jackpot.

Fairburn has relented, to a degree, and is now only going to cash in £75m over 2018 and 2019. Given all this is a result of taxpayers footing the bill for house buying this amounts to grand-scale looting of the state in a style that would make a Russian Oligarch blush.

According to Shelter, Fairburn’s pay off is enough to build a new house for every homeless person in York where Persimmon’s HQ is based. But as any trade unionist knows Persimmon is only one of the latest fat cat scandals to escape from the balance sheets funding the bonanza for Britain’s chief executives.

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On average their pay packages are now so generous that they only need to turn for work for three or four days and they’ll have put as much in the bank as the ordinary worker takes home in a year. The average pay of a British CEO is now a bundle that makes up more than £5m. That makes their take home ratio 129-1 when compared to that of the average worker.

These facts all come from a new book, just published, titled “Are chief executives overpaid?”. It’s written by Deborah Hargreaves, one time business editor of the Guardian. It is a bombshell of a book which explodes all the myths about executive pay and why these levels of moolah are justified.

What about the one that if we don’t stuff the bosses mouths with gold, our top people will up sticks and go elsewhere to exercise their extraordinary talents? Hargreaves argues with facts from the Fortune Global 500 companies that out of 489 appointments made in these companies, in recent times, only 4 chief executives were recruited from an overseas company. So having to pay chief executives top dollar to guard against losing them to international markets is tosh.

Hargreaves is excellent on explaining how we got here and has a host of policy offers including higher corporate taxes, mandatory workers on the board, binding shareholders voting on executive pay, even binding workforce votes on executive pay. And mandatory maximum pay ratios between the bosses and workers in companies bidding for multi-million Government contracts.

Mind you we have been arguing for these policies for years. The central issue is that there is a direct correlation between the decline of the power of the unions in the UK and the outrageous rise and rise of chief executives’ pay. So maybe the most important thing to be done, without waiting for political ‘manna from heaven’, is to build the power of the unions again. Relentlessly.

 Deborah Hargreaves “Are Chief Executives Overpaid?” (Politi) October 2018 £9.99

Former BBC journalist, Bob Wylie, is currently writing a book on the Carillion scandal.