Egalitarianism 107

I have no excuse for not blogging the last couple of days, other than that I have been taking long walks over the beach and cliffs with my family. I feel wonderful for it.

There has been much well deserved publicity for the report of the Low Pay Commission, which stated that we are fast returning to Victorian levels of inequality as the gap between rich and poor grows wider at an extraordinary pace. The reaction of talking heads all over the broadcast media has been that it must be for shareholders to set executive remuneration.

Plainly this does not work. Thomas Cook is going under, and it paid its chief executive, who resigned last year, £7 million in four years.

JJB Sports is also going under. It has huge debts, but these are less than its founder, the appalling Dave Whelan, took out of the company himself. Whelan characterised a brief strike against terrible labour conditions at the company’s depot as “communism”. He is a big donor to the Tory party. He is chairman of Wigan Athletic, and his view on racial abuse on the pitch is that “black players have just got to get on with it”.

I am not a fan of Polly Toynbee. She supported Blair tirelessly, appearing not to notice that it was in fact the Blair years, not the Thatcher years, that saw the huge acceleration in the gap between rich and poor. She continued to support New Labour war criminals on the grounds that a tiny improvement in the conditions of poor children in the UK was more important than the lives of hundreds of thousands of children killed or mutilated abroad in Blair’s Wars – a view tantamount, in my view, to racism.

But the blinkered old bat got something right when she scathingly dismissed the notion that it was shareholders who should control excessive wages. The shareholders of major corporations, she said, are often many thousands of miles away, and are fund managers who hold and dump shares fleetingly as short term speculation. They have no more say in running the company than a punter who bets on a racehorse has in running the stable. An excellent analogy.

Governmental regulation is needed to stop ridiculous inequality. Transparency is important, as the government seems prepared to admit, but will not solve the problem. Nor will employee representation on remuneration committees. These employees will be senior “trusties”, and if not, will be subject to all the threat implicit in the government drive – the most energetically pursued of all government policies – to end employees’ rights and protection from unfair dismissal. That loss of employee rights will undoubtedly increase the wealth gap. If you make it easier to sack people, it is a lie that companies will hire more people. They will sack more people.

I maintain that the law should state that net total reward for the highest earner in a company or organisation should not be more than four times the rate of reward per hour for the lowest paid employee. So if a cleaner gets £320 per week for a 40 hour week, the boss should be able to get up to £2240 per week if he works a 70 hour week.

This would have one very good effect – you would in short time find the cleaners getting paid a lot more so the boss can get more. It would need to be plain that agency or sub-contractors working within the company count – so Goldman Sachs can’t just get someone else to clean their toilets. The idea would work particularly well in the public sector, where a whole new raft of super-rich public employees were deliberately created by New Labour.

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107 thoughts on “Egalitarianism

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  • Mark Golding - Children of Iraq

    It took a while to dig myself out of a pile of words in the last thread, but thanks ‘Jives’ for the Guardian link on donors which Craig mentioned here.
    In my opinion nodding dog Clegg should review his terms of reference and instead of ‘nodding’ start digging into the donor data and present a report to his members. They should demand it!

  • Ishmael

    Sorry to gatecrash your article. Would you like to comment on President Medvedev’s address yesterday regarding western aggression? and their response

  • BrianSJ

    The sub-contract aspect is probably insuperable. Does it apply to the firm providing toilet rolls as well as the cleaner? That will keep the lawyers happy.
    Gradgrind (UK) Ltd is a wholly-owned subsidiary of Gradgrind International, registered in the Cayman Islands, so I’m all right Jack.

  • Demeter

    If only the end to employee rights and protection from unfair dismissal could be utilised to end the contracts of the senior managemnt of these companies, whom drive said companies and emloyees life-lines into the ground!

  • anno

    In my job, in the construction trade, we lost all rights ages ago by being shunted into agency work. That was fine when there was plenty of work. But Gordon Brown got jealous of of our expenses. You are driving a van full of tools 100 miles to do a day’s work and he only allowed you to claim a small percentage of the miles against tax. As if a monthly bus pass to a fixed place of work is the same as an instantly scrambled, fully equipped, batman outfit ready to cope with all emergencies.
    I subsist on working Tax Credit and constantly fall into thousands of pounds of debt on my credit card. The people who still have jobs don’t know they’re born, but the recession is about to finish them off. I left Maidenhead at 6 o clock yesterday evening for Birmingham, and the M40 was choc a bloc the whole way. People travelling might look good to George Osborne because of fuel duty, but it hardly solves the problems of energy conservation does it. The truth is that governments are not interested in solving problems, they are only interested in kick-backs from illegal wars and William Hague is just about to start another one:

  • mike cobley

    Democracy is not hypocrisy – but the current pseudo-democratic kabuki is a carnival of hypocrisy.

  • stephen

    so many government regulations for us libertarians?

    what about new AI ex-HRW Suzanne Nossel? human rights regulations for imperial purposes?

  • Richard Gadsden

    I’d have no problem with shareholders determining executive pay. Declare a dividend and let each shareholder decide how much of their dividend goes into the executive pay pool. Fund all pay, bonus and remuneration out of that pay pool.

  • Vronsky

    Well said Craig, but we should begin with the politicians. Their salary should be a (low) factor of the national average and their pensions the same factor of the state pension. This might give them some real interest in improving these indices. And if they want to make it easier to sack staff, let them show some consistency by giving us the right to recall sitting MPs.
    Politicians regulate a world to which they do not belong, and do not wish to belong. They are wonderfully, beautifully safe. They don’t lose their jobs, or their pensions, or their limbs in futile wars. They have no skin in the game, and that’s the problem.

  • Komodo

    Don’t know if Clegg is going to “review his terms of reference”, Mark. More likely he’ll be looking at the black hole in the Lib Dems’ finances, and wondering how he’s going to overcome the dual handicap of no money and no credible policies the next time he begs us to vote for his little band of hopefuls.
    For instance he will be missing the fraudster Michael Brown (busted in absentia and sentenced to seven years – still on the run). And Lord Jacobs erstwhile party treasurer, who has just left after a small dispute about Clegg’s policy on income tax: a matter in which the wealthy Jacobs might be cruelly supposed to have a vested interest. Anyway, he’s not donating to the Lib Dems any more. Jacobs has other friends:
    but for Clegg, party funding is a sensitive topic these days.

  • david

    Interesting article, but your 4x anaolgy simply wont work. I own and work within my own business, I put MY money MY house MY car on the line to start and support this business ( and the 12 solid long term well paid jobs it creates) why should my renumeration be limited ? I take all the risk, if it goes wrong I lose my house my car and all my money.
    In order for people to actually take the massive risk of starting a business they have to have hope of making themselves wealthy. If all they can earn is 4x the lowest paid then you wont create a load of well paid jobs… you will kill the creation of new business’s.
    The employment law does need to be changed, it is very hard to get rid of an employee that isnt really pulling their weight, which means other employees then have to cover their lack of effort. How is that fair ?
    If you feel that people who own their own business are all big bad bosses then I suggest that you try and start your own sucessful business employing other people. Its not a job, its a lifestlye choice, and its bloody hard work, bloody stressful, and frequantly extremely frustrating. Owners of business’s are at work 24/7, it affects their social and family life beyond measure. So why bother ? Several good reasons. I control what I earn, not some numpty who has never tried to run a business, I control when I go to work and what time I go home. I answer to no one. If you make me answer to some ludicrous concept of 4x wages Ill take my business and leave. 12 more people on the dole – what a great solution that is.
    My shortest serving employee is 5 years, my longest is 20 years. Obviously my staff like being here, yet you still want to punish me ? For what exactly Craig ? Giving 12 people a good job.

  • Komodo

    I’ve no wish to belittle your role in society, David, but you presumably pay yourself more than 4X the mean salary of your workers. Let me assume for the sake of argument, that you employ 6X. If you invested the extra 2X in the business, you could perhaps grow it to the point where another employee could pay for himself. Or you could just take on two more workers and be able to accept more work. That would be if you were seriously concerned about maintaining employment. Actually, I suspect that you feel entitled to what you pay yourself. You are probably doing more work than your employees. So, how many hours are there in the day? 24 X 7 (your hours) / 8 X 5 (their hours) = 4.2. Will you settle for 4.2?

  • glenn

    Very fair points in this article. Perhaps another point to consider is tax – when it drops to anywhere near 50% at the top rate, you find executive pay starts to skyrocket. Back in the days when we had 90%+ at the very top (more than a million a year), it was so tax inefficient to pay massive executive salaries, that the money was left in the business.
    About your restriction that the lowest paid employee should not get less than 1/4 of the hourly wage of the highest paid – this socialist horror is implemented in the US armed forces. A private first class (the lowest rank) cannot receive less than one fifth of any general. Other socialist measures include free lifetime health coverage, education and so on. Shocking!
    David (above) has some interesting views on ‘numpties’ who don’t run a business. As is typical of such people, he brags about how hard he works, wails and moans about the sacrifices involved, bleats that it affects his social life, as if such things were unknown to the rest of us! Then boasts about the rewards he gets for his choices too. Finally, things have to go his own way – he stamps his foot saying he’s going home and taking his ball with him otherwise. Would you like a knighthood in recognition of your efforts too, guv?
    Let’s be frank – anyone employing someone does so because they make more money for the business than the salary they receive. David doesn’t “give 12 people a good job”, he uses the services of those people to make himself vastly more money than he pays them. Much more than 4 times more by the seem of his shrill protestations! Greedy cry-baby.

  • Enoch Powell

    Shareholders are the owners. Of course the owners, and no-one else, should determine staff pay. And by the way, the gap between rich and poor is not relevant to anything. The poor have got richer. What other people earn is none of their, or your, business.

    You also seem to forget that you yourself are one of the privileged few whose earnings over the years bore no relation to the “work” that you did.

    What did you ever make (other than a huge mess)? You led a *very* comfortable, taxpayer-funded life for your entire career, and never did a real job. You never made anything.

    The gap between normal people and people like you is far more relevant to society’s problems than any other gap.

  • passerby

    “I own and work within my own business, I put MY money MY house MY car on the line to start and support this business ( and the 12 solid long term well paid jobs it creates) why should my renumeration be limited ?”
    Clearly the rantings of a troll! Any self employed/entrepreneur would be perfectly aware that there exists no chance of making even one and one half of one times the salary of the lowest paid. In fact the whole notion of setting up your own business; is a sham sale of castles in the air, and for those whom have made the move into these castles it soon is made clear; there is no gravy train, but a life of drudgery and hardship which somehow is never even acknowledged.
    The CEO of various blue ship had no role in founding these corporates, and have not done more than bossing about the underling mid level managers whom in turn deliver the goods, along with the trickeries of the ex tax inspectors turned poachers making sure the corporate pays as little tax as possible if any at all.

  • david

    @komodo. I can only employ people to fill the work available. If getting more orders was as simple as employing new people I would have done it years ago. Sadly it isnt that simple. With over time and bonus’s my people can earn £30K. Thats for what is classed as unskilled work, although I personally regard it as skilled work. Do I earn more than 4x their basic, on a good year yes, in a bad year no. I dont earn 4x their max earning. I could if I paid them less, but you get what you pay for and my staff are the best.
    My point is that there are good employers and bad employers. The law is designed to keep bad employers in check. It half works, but it does punish good employers. Im an optamist, I really want to believe that there are more good employers than bad.
    When the recession hit, I halved my wages so that I could keep 1 more staff member, sadly I had to let 5 go, but if id kept my wage at its pre crisis level it would have been 6 gone.
    There are good and there are bad, you cannot lump them all into one group called greedy bosses.

  • david

    @passerby….. sorry but your very wrong. I am no troll and frequantly comment here. If your first reaction to someone who doesnt share your world view is to name call, that just shows a lack of intelligence. Discuss with me if you want, but as soon as you start being abusive I have zero interest in you.
    Have a nice day.

  • Mary

    Sorry too far back to put on the correct post and as Craig is mentioned, I’ll post it here.

    Jonathan Cook on Matthew Gould: The Missing Link in “Rogue” UK Foreign Policy?
    The official inquiry castigating the UK’s former defence secretary Liam Fox for what has come to be known as a “cash-for-access” scandal appears to have only scratched the surface of what Fox and accomplice Adam Werritty may have been up to when they met for dinner in Tel Aviv.
    Nazareth – Last February Britain’s then defense minister Liam Fox attended a dinner in Tel Aviv with a group described as senior Israelis. Alongside him sat Adam Werritty, a lobbyist whose “improper relations” with the minister would lead eight months later to Fox’s hurried resignation.
    According to several reports in the British media the Israelis in attendance at the dinner were representatives of the Mossad, Israel’s spy agency, while Fox and Werritty were accompanied by Matthew Gould, Britain’s ambassador to Israel. A former British diplomat has claimed that the topic of discussion that evening was a secret plot to attack Iran.
    Little was made of the dinner in the 10-page inquiry report published last month by Gus O’Donnell, the cabinet’s top civil servant. O’Donnell found that Werritty, aged 33 and a long-time friend of Fox’s, had presented himself as the minister’s official adviser, jetted around the world with him and arranged meetings for businessmen with Fox.
    The former minister’s allies, seeking to dismiss the gravity of the case against him, have described Werritty as a harmless dreamer. Following his resignation, Fox himself claimed O’Donnell’s report had exonerated him of putting national security at risk.
    However, a spate of new concerns raised in the wake of the inquiry challenge both of these assumptions. These include questions about the transparency of the O’Donnell investigation, the extent of Fox and Werritty’s ties to Israel and the unexplained role of Gould.
    Craig Murray, Britain’s former ambassador to Uzbekistan until 2004, when he turned whistle blower on British and US collusion on torture, said senior British government officials were profoundly disturbed by the O’Donnell inquiry, seeing it as a “white wash.”


    Jonathan Cook was a Guardian jounalist but got out of the MSM and now lives within ‘the belly of the beast’ in Nazareth with his Palestinian wife.

  • Komodo

    David, point taken. And certainly for SME’s the boss needs to be able to take up the slack to some extent in bad times as well as being comfortable in good. Also, he probably has more assets tied up in the business, generally speaking. I wasn’t entirely serious…just a bit.
    “Enoch Powell”; death seems to have weakened your previously forensic logic. Actually, shareholders do not determine executive pay. There is an increasing awareness of this, and even shareholders are pissed off that their dividends are being sapped by exorbitant pay awards to management. Decided by management, who else? Also, many, if not most shareholders in a major corporation are transients; account numbers in a market trader’s portfolio. With electronic trading, they may “own” part of the company for milliseconds only. Or they may hold nonvoting shares and have no say at all in the company (see News International, which is structured to keep decisions in the hands of the Murdochs and their pet sheikh.
    Anyway, I hope it is not too hot for you in hell. I’m told those rivers of blood are strangely cooling if you need a rest.

  • DonnyDarko

    Yes Craig , Everything under our ConDem Govt. is taking on a Dickensian hue.
    Easier to sack workers earning lower wages with less freedom but the power to take part and vote in a rigged system. If you think about how long we have actually had the freedoms which we are currently losing , its only about 80 years.Not long in the greater scheme of things.
    I do agree with David.I have my own business and it’s a struggle. Having staff is a major struggle and expense.And when , if you are lucky enough that there is profit to enjoy,then those are the fruits of your labour.It sounds like David passes some of that fruit on to his workers.. the way it should be.A sound business means everyone can prosper.Fatcats are light years away from small business’s and the rules are diffrent.Small business’s pay taxes and all dues for employees…. the too big to fail business’s seem to be able to avoid much of that.Small business’s do fail when it goes badly.No tax payer bails them or their employees out.

  • passerby

    @ David
    The rates of return >x4 you are expounding can only be achieved in Sales of illicit drugs, arms, protection racket or offer of Prostitution/sex worker industry, and the funny business of money/finances.
    Any other type of business as the staggering rise in the numbers of bankruptcy indicate the owner/director is lucky to make more than the ratio already stated. So far as the Small Business sector goes, as for the Medium and Large businesses as indicated before, none of the founders run these enterprises.
    As for the debate about “intelligence” and weltanschauung I leave that to armchair philosophers.

  • James Chater

    I support the idea, but the ratio sghould be more like 20:1 rather than 4 to 1 because, as some of you have alrteady said, of the need to reward the risks entrepreneurs take.
    I would tax not only the profits of companies but also tax them more the larger they get. Otherwise the companies get too big and bully us all, as is happening now.

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