Skip to main content

High Pay Commission

The report of the High Pay Commission (HPC) was released yesterday - click here.  In previous posts, I have lamented about high pay – see here and here.

The HPC’s report finds evidence that

“Excessive high pay damages companies, is bad for our economy and has negative impacts on society as a whole. At its worst, excessive high pay bears little relation to company success and is rewarding failure.....Our findings also show that the argument used by many senior figures in British business, that pay must escalate in order to attract the best talent from abroad to UK companies, is a myth. Our own evidence shows that global mobility is limited, with only one successful FTSE 100 chief executive officer poached in five years – and even this person was poached by a British company.”

The scale of the relative rise in high pay uncovered by the HPC is staggering.

“Previously unpublished figures show that pay at the top has spiralled alarmingly to stratospheric levels in some of our biggest companies. In BP, in 2011 the lead executive earned 63 times the amount of the average employee. In 1979 the multiple was 16.5. In Barclays, top pay is now 75 times that of the average worker.  In 1979 it was 14.5. Over that period, the lead executive’s pay in Barclays has risen by 4,899.4% – from £87,323 to a staggering £4,365,636......During the last 30 years rewards have been flooding upwards, with far more modest returns going to the average employee. Since the mid 1970s, the general workforce’s share of GDP had shrunk by over 12% up to 2008.”

The HPC report will not change anything as it is our political system which is broken.  High pay is just one symptom of a deeper problem.  I'll come back to this in future posts.

Popular posts from this blog

Bitcoin Bubble?

According to Robert Shiller , speaking at Davos, Bitcoin is a perfect example of a bubble - story here . Shiller sees Bitcoin as a backwards step in the evolution of money.   George Selgin , a free banker, takes an opposing view - click here .  Although he doesn't believe that Bitcoin is money, he sees its development as a fascinating turn in the evolution of money. In particular, he lauds the fact that Bitcoin production is constrained and cannot be infinite. There is a short video below where Bitcoin explain how it works.

How Valuable Are Connections?

Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak and Todd Mitton have written a paper on whether firms connected to Timothy Geithner benefited from these connections. They do so by looking at how stocks of these firms reacted to the announcement that he was a nominee for Treasury Secretary in November 2008. They find that there were large abnormal returns for connected firms. Below is the paper's abstract and the full paper is available here . The announcement of Timothy Geithner as nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a connection. This return was about 6% after the first full day of trading and about 12% after ten trading days. There were subsequently abnormal negative returns for connected firms when news broke that Geithner's confirmation might be derailed by tax issues. Excess returns for connected firms may reflect the perceived impact of relying on the advice of a small ne

Boom and Bust: A Global History of Financial Bubbles

Boom and Bust: A Global History of Financial Bubbles, co-authored with my colleague Will Quinn , is forthcoming in August. It is published by Cambridge University Press and is available for pre-order at Amazon , Barnes and Noble , Waterstones and Cambridge University Press .