Extract from Labour’s “Executive Remunderation Review”, a report commisisoned by John McDonnell MP and Rebecca Long-Bailey MP from a panel of experts led by Prof. Prem Sikka.
Persistent inequalities in the distribution of income and wealth are a key social problem. Inequitable distribution of the wealth generated by the brawn and brains of employees exacerbates inequalities.
A recent report shows that the average income for all households in 2017/18 increased by just 0.9%, the lowest rise for four years and that is less than half the average between 1994 and 2007. In real terms millions are worse off.
In 2003, households on the lower half of incomes earned £14,900, after inflation and housing costs, but by 2016/17 it declined to £14,800. Poverty and inequality is on the rise. It is an entirely different picture at the other end of the pay spectrum. After just three working days in 2018, the UK’s top executives made more money than the typical UK full-time worker will earn in the entire year.
A 2017 study reported that the highest FTSE 100 executives collected an average of £4.5 million, equivalent to 160 times the average earning and 262 times the Living Wage. Despite a pay cut, WPP chief executive Sir Martin Sorrell (now departed) received £48.1 million, equivalent to 1,718 times median earnings in the UK and 2,533 times the lowest paid job in his own company.
At Persimmon, a construction company, its chief executive received £100 million, equivalent to 1,320 times the average pay and 3,195 times more than the lowest paid job at the company.
The challenge is not only to devise mechanisms that constrain undeserved executive pay in large companies but also create mechanisms to enable workers to secure an equitable share of income/wealth created with their own brain, brawn, sweat, commitment and energy. The key to that is to empower employees of large companies to vote to executive pay.
Customers are the backbone of all enterprises but are increasingly being poorly treated though profiteering by banks, gas, water, electricity and other companies. They should be empowered to penalise executives delivering poor goods/service and equally also reward those delivering high quality products and services. They too need to be empowered to vote on executive pay in large companies. The above reforms need to be accompanied by reforms to enhance transparency, mechanisms to restrict undeserved executive pay and enforcement of the statutory framework proposed in the report.
Read the whole recommendations here