Thursday, 3 May 2012

HELP - How can I spend £3,500 a day?

Boardroom Pay – Shareholders Revolt

This morning in the UK, the Conservative-Liberal coalition licks its wounds after being thrashed in the local elections in which they are losing hundreds of local-council seats to Labour. Will public schoolboys Prime Minister Cameron and Deputy Clegg now do a U-Turn and allow the UK economy to expand?

Meanwhile, in Boardrooms, top directors are weeping and nursing their injuries after their wrists have been slapped with a wet flannel by powerful shareholders “outraged” at excessive executive pay. The shareholders are institutions, insurance giants and pension funds etc, that hold big chunks of shares – on behalf of the bewildered public. Those same institutions also dole out excessive pay to their executives – and many share the same conspiratorial remuneration-committee non-executive directors who, for a mere £50,000 a year or so, in three days work, will calculate that quite newly elevated, ordinary, talentless, risk averse plodders MUST be paid £3,500 a day – or they will emigrate to Rockall or China leaving our nations in ruins. And, of course, if they have to spend £3,500 a day on themselves – an onerous task - the executives cannot be expected to actually turn up for work.

…So we might be forgiven for not wholly believing that the wet-flannel wielders mean what they say.

And, of course, the revolting shareholders (or the executives representing the shareholders) decisions are not binding on the criticised corporations, they are only advisory.

How should it work?  The most important socio-economic function of corporate executives is to provide jobs – to create jobs – to manage workers – to run effective organisations. Their joint pay should be a percentage of the wages paid to ordinary workers, adjusted by the numbers of jobs they manage and capped against average pay by, say, 5 times. E.g. – If BT employs 80,000 people in the UK, on average wages of £35,000 a year, the entire executive group, say 100 mangers, should earn 80,000 x £200 or £160,000 each – but capped to 5 times the average pay. If the workforce declines – so does the executive pot.

Shareholder power must be reformed by law to overcome the divide & rule tactics of executives.

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