The High Pay Commission has recently completed an enquiry into the pay of business executives and how it has increased over the last three decades. The report found that the pay of top executives has increased by over 4000%. The report is also claimed that this is damaging people’s trust in business in the UK.
The rising executive pay has seen inequality in wages in the UK increase significantly. In 1980 the average pay was £6500 a year but today this figure has risen to £26,000, a three times increase. This is significantly lower than the 4000% increase that has been seen for executives.
The High Pay Commission based on its investigations has requested that executive pay be significantly simplified and that employees are involved in the decisions of how much their managers get paid. It is also suggested that companies are forced to publish what the difference between the highest-paid and the lowest paid person is in their company.
Currently these figures off-limits from the public and distorted by immensely complex pay structures and financial details. The Commission has said that the extent of this has meant that failures are rewarded and that key talent is drawn away from where it is needed most.
The report states, “We found that it is a myth that the pay of executives need to rise in order to keep their skills at a certain company. If the pay structure was changed it seems that there would be very little talent drain. This report shows that the pay gap encourages disillusionment among the public with big business in the UK.”
Deborah Hargreaves is the chairman of the commission and she has stated, “This high pay is very damaging to our economy and the fact that pay is set in secret encourages a great disillusionment with business among workers and the general public. In the UK people believe in fairness and these pay figures are not there in time the country is going through a period of unprecedented austerity. Fortunately, politicians recognise the need to tackle executive pay.”
In a poll which involved 2000 members of the general public, 80% of them said that they thought the pay of chief executives was out of control. Nearly 70% also stated that companies could not be trusted about the amount of pay they were issuing to their executives and that they would like to see the government take action to make executive pay more transparent.
John Varley was the chief executive of Barclays and his pay is often cited in the report. It states that he was earning nearly £4.5 million which is nearly 170 times more than the average salary in the UK. Brendan Barber is the general secretary of the commission and has stated, “Executives desperately need a dose of reality, they seem to think that austerity does not apply to them and I suggest that companies start publishing their pay structure in an easy to understand format without any more hesitation or delay.”