Realist, not conformist analysis of the latest financial, business and political news

MPs Spout Nonsense About Bosses And CEO Pay – What A Surprise, Eh?

There is no logical relationship between the pay a worker in a company gets and that the CEO or other boss gains. It simply doesn’t exist. To assert that it does is to descend into some sort of madness. For example, take a company that makes sandwiches – sure, they exist, they’re big business these days. The CEO can be running an organisation of 20,000 people – say, an example – dealing with all the things that CEOs of 20,000 strong companies do deal with. The sandwich makers are on minimum wage. Or we’ve the other bloke running an organisation of 20,000 more highly paid, umm, mineworkers. Dealing with all the things that CEOs of 20,000 strong companies deal with.

The pay of the two CEOs should be determined by what miners and sandwich makers get? Or what CEOs of 20,000 strong organisations get? D’ye see the problem?

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Greedy bosses risk undermining Britain’s system of capitalism by boosting rewards at the top even as workers see wages stagnate, MPs have warned. Pay for chief executives should be more closely linked to that of their workforces, according to the members of the Business, Energy and Industrial Strategy Committee. Pension contributions should match those of normal workers and the committee that sets executive pay should include a staff representative, the MPs recommended. “In times of stagnant or minimal pay growth for the ordinary worker in particular, business leaders have a responsibility to avoid the eye-watering and unjustified executive pay awards that have recently too often embarrassed… [/perfectpullquote]

You can imagine the rest of that. Inequalideeee!

Insisting that pension contributions should match those is particularly stupid. It’s as if they’ve never heard of the lifetime income hypothesis, Modigliani or St Milton. Well, actually, they can’t have done to state something so numbingly stupid. Of course the bloke on £100,000, or £1,000,000, a year now will want a larger pension than someone on £20,000 now.

There’s also that rather more important point of course. What shareholders pay the people they hire is up to shareholders, it’s damn all to do with MPs. It is the shareholders’ money, not the MPs. And who doesn’t think that if CEOs were paid a little less than MPs – or, MPs were paid a little more than CEOs currently are – then that would be just fine and dandy by those MPs?

There being more than just a little suspicion that this is what is really being complained about. It’s the other members of that upper middle class, that establishment, complaining that CEO and banker pay has pulled away from their own, nowt to do with the lower orders at all.

But, really, it’s as little to do with MPs as what some editor agrees to pay me is:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] The proposals go wrong right from the very start. How much people pay other people has got nothing to do with the government. It is other peoples’ money and for them to deploy as they wish. This is true of the few hundred people able to play football to Premiership levels just as is it of those few hundred capable of running large companies. There is also good evidence that these large sums are justified, and even a good deal. In football, not paying up leads to losing, then relegation. In business, we know that Japanese firms – which offer much more modest CEO pay – perform worse than the higher paying ones in English-speaking economies. Thus concern over high pay is incorrect on both moral and practical grounds. [/perfectpullquote]

The correct answer to this sort of impertinence from MPs is the Anglo Saxon Wave.

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Jonathan Harston
Jonathan Harston
4 years ago

People in *trade* get paid more than us MPs? That just will not do!

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