Watered down

In the UK today, it takes a typical chief executive three days to earn what their employees earn in an entire year.

Rising pay inequality has become front and centre in an ongoing national debate that began as the world economy crashed a decade ago, when those largely responsible nonetheless continued being paid monster salaries.

But little has changed since then – on this date, the average executive has already earned more than £3.5m since January, according to the High Pay Centre.

Prime minister Theresa May vowed to do something about the problem last year, when, in a major departure from Thatcherite free-market economics long favoured by the Tory party, she pledged greater regulation on executive pay.

Plans dropped

But again, despite the rhetoric, nothing has changed. The details of the government’s much-anticipated proposals to tackle this runaway CEO pay were announced today (August 29) — to bitter disappointment from workers expecting real action.

Hopes for the government following through with its explicit promises to put employees on company boards and have binding votes on executive pay were dashed – the two proposals were dropped entirely.

Now, the reforms will be watered down to three main policies.

One will require all publicly listed companies to publish their company pay ratios – how much the chief executive earns compared to what an average worker earns – and will have to publish an explanation as the pay gap varies from year to year, with the goal of bringing the gap down.

The second policy is the creation of a new ‘name and shame’ list which will see the publication of companies whose shareholders vote in the majority against executive pay packages.

The move was seen as ineffective by many trade unions; after all, this information is already in the public domain and the proposal falls far short of having binding votes on executive pay that the prime minister first hinted at.

As TUC general secretary Frances O’Grady highlighted in an interview on the Today programme this morning, shareholders voting against executive pay would do little to tackle the problem of growing income inequality – in the last year shareholders voted down remuneration plans at only three companies.

Under the government’s new plans, listed companies will be also be asked to either assign a non-executive director to represent employee, create an employee advisory council, or nominate a director from the workforce – a far cry from Theresa May’s pledge last year to have workers on company boards, a practice that is common in the rest of Europe.

What’s more, this plan isn’t even absolutely mandatory — it will be followed on a ‘comply or explain’ basis, meaning companies which choose not to go along with the plans are free to do so as long as they explain why.

Labour’s shadow business secretary Rebecca Long-Bailey derided the government’s plans, dismissing them as wholly ineffective.

“The Tory plan is a fraud, watering down a promise to increase workers’ voices to a lone representative on the board of directors or a separate employee advisory council,” she said. “Each of these will be easily outvoted or ignored.

“The Tories seem to believe fixing Britain’s broken system of corporate governance, which not only leads to scandals like BHS, extreme executive pay, but also growing inequality and stagnating wages, is just a matter of changing one or two nameplates around the boardroom table.”

Redress imbalance call

Labour proposals to reign in runaway corporatism stand in stark contrast to the path the Tory government has now taken.

The party has pledged to limit pay ratios between executives and workers to 20 to 1 in the public sector and all companies bidding for public sector contracts.

The party has also pledged to change company law so that all businesses’ primary responsibility is not only to shareholders – as the law stands now – but also to employees, customers, the environment and the wider public.

Unite general secretary Len McCluskey slammed the government’s plans announced today.

“The UK is one of the most unequal developed economies,” he said. “Too many at the top enjoy eye-wateringly high salaries and rewards like gold-plated pensions while the workers who have helped make them so rich struggle more and more to make ends meet.

“We see it in the wealth enjoyed by bank bosses while bank workers have to make ends meet on breadline wages,” he added. “We see it too at our national carrier where the fat cats at British Airways earn many hundreds times more than cabin crew on ÂŁ12,000 and food vouchers.

“So yes, absolutely something must be done to bring some sanity and justice to wages in this country.

“What is being proposed today will not do that,” McCluskey argued.  “It will not address the wage crisis working people are enduring.

“The government has chosen to distance itself from making changes, shoving the onus for this onto the wider community to hold listed companies to account by lobbying shareholders.  This is simply inadequate, and is actually insulting.”

“Today’s announcement only confirms that the Tory government is washing its hands of its responsibilities to change the broken corporate culture in this country.

McCluskey said that if the government was serious about redressing the imbalance then it “must support “collective bargaining and stop decrying trade union members as somehow the `enemy of the state’.

“Survey after survey has found that where unions are present workers are more justly rewarded, so we are absolutely part of the solution,” he said. “Once again the big business lobby has brought the Tory party to heel.”