Ten years of austerity in the UK have produced a definitive answer to the question: does austerity drive economic growth? (Spoiler: No)
The past decade has seen the UK dead last in advanced economies for wage growth — the weakest decade for employee pay since the 19th Century! — while executive pay has grown and grown, with the average CEO:worker pay ratio topping 1:150 (it was 1:20 in the 1980s).
A new report commissioned by the UK Labour Party (the largest Labour Party in Europe!) from Sheffield University Emeritus Professor of Accounting Prem Sikka proposes a slate of reforms to curb executive pay and the toxic behavior it drives, such as abusing workers and cutting back on customer service, service delivery, and quality.
The proposals include: making executive compensation public and publishing stats on gender- and race-based gaps in executive pay; ending stock-based compensation (which has been shown to incentivise financial engineering and short-term thinking) in favour of all-cash executive compensation; giving customers (and other stakeholders, including employees) a vote on executive compensation packages; and making executive compensation subject to annual, binding shareholder votes.
The measures would only apply to companies with more than 250 workers — about 7,000 UK firms, who collectively employ more than 10 million workers in the UK.
Labour has not promised to adopt all of Prof Sikka's recommendations.
The report suggests employees and other stakeholders should have a say in setting boardroom pay in order to "exert pressure for better distribution of income and improved quality of service for consumers".
The report added it would be simple to identify the customers of utility companies but that loyalty schemes made it possible to take account of customers' views of other big firms as well.
"Thus, consumers in many industries can be identified with certainty and must be empowered to vote on executive pay. This would help to check profiteering, mis-selling of products, poor services and abuses of customers."
Employees facing wage freezes and stakeholders experiencing poor products, poor service and high prices were unlikely to back big rises for executives and this would act as a powerful check on "exorbitant" pay for directors, the report noted.
Executive Remuneration: Securing Fairer Distribution of Income [Prem Sikka, Tom Hadden, John Christensen, Christine Cooper, Colin Haslam, Alastair Hudson, Paddy Ireland, Martin Parker, Gordon Pearson, Ann Pettifor, Sol Picciotto, Jeroen Veldman and Hugh Willmott]
Labour plans to give customers of big firms vote on boardroom pay
[Larry Elliott/The Guardian]
(via Naked Capitalism)