A continuing surge in top executive pay is damaging the interests of British business in political, economic and reputational terms. The question is whether its leaders are prepared to do anything about it.
Last month’s report from Incomes Data Services that total earnings of FTSE 100 directors rose by an average of 49 per cent in the latest financial year – a time when overall wages were falling in real terms – instantly made the political case against the 50 per cent personal tax rate harder to argue. This matters: high personal taxes are blunting the competitiveness of UK firms. But don’t expect sympathy for that idea when the newspapers are full of fat cat headlines.
The latest round of pay increases was spread right across FTSE board members – indeed, take CEOS and finance directors out of the equation and average compensation rose by 66.5 per cent. These figures bear no relationship to overall company performance and indicate a dysfunctional market allocating resources inefficiently and providing perverse incentives along the way.