Leader: Bosses plugging their pay to workers the way ahead

BOSSES’ pay is always a contentious matter and in hard times when the pay of workers is going down, for workforces to learn that their top management and boardroom directors are receiving ever larger sums is a recipe, not just for workforce disillusionment and worsening productivity, but for discontent and strife.

Britain’s economy cannot afford the risks created by over-lavish bosses’ pay awards, especially after the revelation that top executives’ pay rose by nearly 50 per cent in the last year.

The intentions to curb excesses announced yesterday by Nick Clegg, the Deputy Prime Minister, are therefore welcome. Mr Clegg has rightly repudiated the idea that government should set pay levels, instead advancing the interesting idea that there should be reform of what he describes as the old boys’ clubs and closed shops of the remuneration committees that decide on executive pay levels.

These committees invariably work by looking at what median pay levels are for executives in comparable companies, deciding that they want above-median people to run their company and then offering above-median pay packages. It means an ever-escalating pay race, with salaries defining who are the alleged top performers and not performance deciding who gets the top rewards.

This is a nonsense and it has to stop. Greater clarity and transparency so that executives have to justify their pay directly to the workers they manage and the shareholders whose funds they use looks to be a promising way forward.