The Right’s muddle over high pay and why Margaret Thatcher would not be happy

The Left is wrong on high pay, but the Right is hopelessly muddled and needs to gain the high ground, writes management author David Bolchover

David Cameron in Canary Wharf: where should he stand on high pay?
David Bolchover
On 23 January 2012 11:41

There are other reasons, too, why the Right should be confronting high pay.  Money is going from the pockets of the owners (capital) to employees (labour). That would be fine if we can reasonably conclude that the recipients possess a genuinely rare talent. But the reality is that they have simply captured and then distorted the worthy principle of meritocracy to make themselves rich.

What’s more, in the modern world, the population at large are now owners of public companies through our pensions and savings. True heirs to Margaret Thatcher shouldn’t be comfortable with money being snatched from Joe Public by a self-serving elite, comprising either public company or public sector executives. After all, she became the darling of the Right because she stood up for the little guy, granting tax breaks to small businesses and allowing council tenants to buy their houses.

Excessive pay in the state sector is in itself a direct consequence of high pay in the corporate world. Why do 48 local authority executives in the UK get paid more than £250,000? Because their employers are told that they must compete with the private sector in order to retain precious “talent”. Dismantle the fraudulent talent myth in the corporate world, and the taxpayer will benefit.

The more enlightened in the Conservative Party are now finally coming round to these arguments, but their recent forays into offering solutions have displayed some naivety, or an interventionist heavy-handedness possibly inspired by a desire to compete for political ground with Labour, or their Liberal Democrat partners.

Cameron suggests giving more powers to shareholders, when the senior executives of powerful institutional shareholders themselves benefit from high pay. Matthew Hancock, the Conservative MP, wants criminal prosecution for irresponsible executives, when impartial observers would find it just as difficult to prove personal culpability for corporate failure as they would to demonstrate individual impact on corporate success. Anyhow, since when has a commercial misjudgement been a crime?

The Right needs to remain true to itself. Cameron and his allies should be repeatedly explaining their position on executive rewards, making the above points and other related arguments. But kneejerk intervention through laws, regulation or taxation is the territory of the Left. The battle against irrational high pay will be won through open debate and cultural change, as those awarding themselves huge wealth lose confidence in their own hollow justifications, and are gradually shamed by superior arguments into submission.

There are clear signs that this is already starting to happen. A 2011 Ipsos MORI study in the UK contrasted the current attitudes of high corporate earners with the results of earlier research. In a similar 2008 study, interviewees had frequently maintained that their abilities, workload and long hours on the job justified their high pay. Now, however, top earners did not try hard to offer a rationale for their salaries, admitting that they were merely benefiting from an overall pay framework that just so happened to exist.

If attitudes among high earners can change so dramatically in three years, what will another three of years of public outrage bring, especially when their former allies on the Right are finally waking up?

David Bolchover is the author of “Pay Check: Are Top Earners Really Worth It?” A new, updated edition has just been published.

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