Is High Pay Commission really tuned into business growth?

I blogged a few weeks back about the High Pay Commission, and it was in the news again over the past couple of days.
If you don’t want to track back through the link, here’s the resume: the High Pay Commission isn’t a Commission in the normal sense of a heavyweight, government-sanctioned probe into a matter of major concern. It’s a one-year project funded by a left-leaning think tank which wants to influence government policy. So the name’s a bit of a fib.
And though it is clearly all about what goes on in the upper reaches of stock market businesses, it doesn’t involve any business people. This Commission’s members are academics and a couple of well-connected London journalists.
The Commission’s mission is written all over its name: a belief that senior executives get paid way more than most, and probably don’t deserve it.
It’s in the news again this week because it has published its final report. It finds that executives right at the top of big stock market firms enjoyed pay rises which disappeared into space, compares that to the less-than-stellar performance of their businesses, and wants other people to have a say in executive pay in future. So no surprises really.
I’d be amazed if anything happened, though, for three reasons.
One is that a government grappling with no growth probably has neither the time nor the inclination to launch into an issue which risks being portrayed as dis-incentivising businesses at the cutting edge of the economy (indeed, Business Secretary Vince Cable has already kicked the Commission’s proposals into the long grass by saying government will look at some proposals next year).
Secondly, some of them sound like Utopia-meets-the-boardroom. The idea that any business would want employees sitting on a committee voting on a proposal about how much the boss gets paid is unrealistic. Why not stop there: we could have selected employees also voting on the sales strategy, couldn’t we? No, actually – it would be stupid.
Finally, while reining in top pay might make ordinary people feel good it will do nothing to make them wealthier. The answer to that is enabling economic growth, not disabling executive pay.
And this is the beef with the High Pay Commission. It’s an entirely London-centric concept: backed by a London think tank, run by people based in London and focusing on a small part of the business universe which is centred on London.
It seems to think silly salary packages doled out by global enterprises should be a big issue for the UK government. But is this really where the action's at?
As I said in the earlier blog, many ordinary business people have no more time for the PLC world than the High Pay Commission does. They think it’s too short-term, and have little respect for stock market chief executives or their jackpot pay packets.
But they don’t lose sleep over it. The big issue for them is the continuing inability of government to act like it gets SMEs – the real bedrock of the economy – on any level.
If it did, there would be fewer rules and regulations, cleverly-targeted tax incentives, better access to finance, and a serious effort to solve the continuing problem of school and college leavers who don’t understand what it takes to hack it at work.
The High Pay Commission’s proposals simply do not register on the radar of key business concerns.
But perhaps they weren’t meant to. Protests not so very far away from the Stock Exchange (and mirrored in Nottingham’s own Market Square) have been making a lot of noise about inequality and unfairness. The Occupy movement is anchored in a belief that capitalism, having landed us all in the soup, is just carrying on like it’s someone else’s problem.
Against that background, PLC bosses paying themselves fortunes according to obscure formulae which seem to come up trumps whatever the weather hardly seems like the stuff of civil society.
So the High Pay Commission is not divorced from reality. It makes some powerful points about the relationship between attainment and reward and public companies’ obligation to fairness.
But the anti-big business rhetoric we see so much of these days is in danger of obscuring a greater truth: that the vast majority of businesses simply aren’t like that, and that it is these businesses that our economic recovery hinges on.
I said in another blog that we were in an era where business has to work a whole lot harder to win public respect, and might start by pointing out the huge contribution it makes to the wealth and wider wellbeing of the communities we live in (don’t forget that 80% of jobs are in the private sector).
If it did, then may be London think tanks would think beyond PLC pay packets when they ponder the best way for business to bring wealth to a wider audience.

Are big bonuses in big firms small beer?

It’s September, and politics is slowly but surely getting back into full swing. Hence the national media has largely lost interest in ‘riots’ in the regions.
So today we’ve seen a renewed debate about whether the Government needs to inject a few quid into the economy and a report by the High Pay Commission suggesting FTSE 350 directors have been lunching on big bonuses while their companies have been going nowhere fast.
The debate about the economy will run and run, but reports which suggest the rich are getting richer while the rest of us struggle is more likely to lodge in the public psyche because it plays to that well-known prejudice that life’s not fair.
Two points about the Commission’s report.
One is that the High Pay Commission isn’t actually a Commission in the naturally understood sense. While Commissions are traditionally set up by government to hold open inquiries into matters of serious public concern, the High Pay Commission is infact a one-year project set up by a London think-tank called Compass, which styles itself as ‘promoting left-wing debate’.
Those origins are reflected in the Commission’s membership and experts panel, which doesn’t include any high-profile business owners or business organisations, and is comprised mainly of academics, consultants and writers concerned with equality and civil society. It also has strong media connections, including former Guardian and BBC journalists.
Nothing wrong with that – everyone is entitled to a view and I’m guessing it’s unlikely the FTSE 350 would collectively invite public inquiry into how much its executives trouser each year in handsome bonuses.
All the same, the name is a bit misleading without explanation.
My big beef is that this self-elected, well-connected body puts so much emphasis on a sector which is unrepresentative of business at large.
So we’ve had another day of headlines about business which encourage the public to think that the commercial world is full of nothing but ruthless fat-cats who are out to screw you for everything they can get.
And that’s an unrepresentative cliche. The High Pay Commission would score some more relevant points if it asked the UK’s vast army of private business owners what they think of their Stock Market cousins. They’d get some pithy responses, I can tell you.
But missing a trick is not the point.
Most businesses are run by people who work their socks off, take considerable personal financial risks, and do it because they are motivated by a desire to make it on their own rather than squirrel away enough readies for a yacht in the Med.
The High Pay Commission may be making some valid points. But stopping FTSE bosses lining their pockets is unlikely to make life better for the public at large. The media focus on it is all a bit London-centric.
Right now, a Commission into what government could and should be doing to provide a cogent business support service for small firms would be far more useful and far more relevant to where our economy is at.