Executives’ high pay ‘corrosive’

The high salaries of top executives are “corrosive” to the economy, the High Pay Commission has said.

In a new report – Cheques With Balances: Why tackling high pay is in the national interest – the High Pay Commission says that “stratospheric pay increases” have seen wealth flow upwards to the top 0.1% and away from average workers.

The report finds that decisions to award huge pay packages are set by a “closed shop,  shrouded in highly complex detail, effectively hidden from shareholders, staff and the public." It argues that there is little truth in the idea that pay must escalate to halt a talent drain in executives.

The report sets out a 12-point plan to halt "spiralling high pay" that it says: “is creating inequalities last seen in the Victorian era”.

The High Pay Commission’s recommended reforms include:

• A radical simplification of executive pay
• Putting employees on remuneration committees
• Publishing the top ten executive pay packages outside the boardroom
• Forcing companies to publish a pay ratio between the highest paid executive and the company median
• Companies to reveal total pay figure earned by the executive
• Establishing a new national body to monitor high pay.

High Pay Commission chair, Deborah Hargreaves, said: “There’s a crisis at the top of British business and it is deeply corrosive to our economy. When pay for senior executives is set behind closed doors, does not reflect company success and is fuelling massive inequality it represents a deep malaise at the very top of our society.

“The British people believe in fairness and, at a time of unparalleled austerity, one tiny section of society – the top 0.1% -continues to enjoy huge annual increases in pay awards. Everyone, including each of the main political parties, recognises there is a need to tackle top pay.

"That’s why we are saying there must be an end to the “closed shop” that sets top pay and that pay packages should be clear, open and published to shareholders and the public.”