Over across the Atlantic, reformers have begun a year-long probe that has the fire-power — and credibility — needed to challenge the sacred cows of the global executive compensation status quo.
U.S. corporate profits, the Commerce Department reported last week, have just hit an all-time quarterly high. This year’s corporate executive pay will likely set a record, too. We’ll know next April, when the latest CEO pay stats start appearing.
We do know, right now, that executive pay overall has survived the Great Recession quite nicely. CEOs are still taking home close to 300 times what their workers average. Until the early 1980s, America’s chief execs seldom took home over 30 times their worker pay.
We also know that the most celebrated check on excessive CEO compensation so far enacted in the United States — the provision in the new financial industry reform act that gives shareholders an advisory “say on pay” — isn’t going to do much to downsize executive rewards.
Several other nations, the record shows, already have “say on pay” measures on the books. None of these measures have decreased executive compensation.
Record profits. Inadequate reform. CEO pay hikes, given this combination, now seem inevitable — and maybe even perpetual. We seem trapped in a status quo that endlessly and shamelessly rewards our biggest movers and shakers.
We need something that gives these movers and shakers a real shake, some new stab at a solution that points a way out of our current compensation excess. That new stab we need may have just appeared — in Britain.
Earlier this month, widely respected leaders from the UK’s business, media, academic, religious, and trade union communities came together to announce a new blue-ribbon “High Pay Commission.” The panel will spend the next year dissecting the drivers behind British “top pay” — and then recommend reforms that can “mitigate or reduce” that “top pay” excess.
We’ve seen, of course, investigations into executive pay excess before. But this investigation could be different. Blue-ribbon CEO pay panels in the past have avoided any consideration of the social and economic chaos we invite when we reward executives royally. The reforms these past panels proposed basically sought only to limit high pay to “high-performing” executives.
This new “High Pay Commission” has a cast of characters that figures to produce an end product far more sweeping. The six commissioners will be drawing upon an “expert panel” that includes some of the world’s most incisive critics of contemporary corporate compensation and the staggering inequality that compensation has created.
In other words, instead of pablum, this new “High Pay Commission” could produce a set of recommendations powerful enough to reverberate across the Atlantic and impact the corporate pay debate in the United States.
The idea of a “High Pay Commission” first surfaced in Britain the summer before last when Compass, a highly visible British think tank, brought together 100 British luminaries who called on the then-Labor Party government “to launch a wide-ranging review of pay at the top.”
This review, the 100 luminaries declared, should go well beyond conventional thinking about executive pay reform and “consider proposals to restrict excessive remuneration” as bold as “maximum wage ratios.”
This “High Pay Commission” idea made lots of headlines. But the Labor Party government made no move to establish any high pay review panel. Neither did the coalition of Britain’s Conservative and Liberal Democrat parties that has governed the UK since the Labor Party’s election defeat last spring.
With no official action pending, the Compass think tank — backed by funding from the Joseph Rowntree Charitable Trust — decided to move forward with a “High Pay Commission” totally independent of the government.
Chairing the new panel will be Deborah Hargreaves, the former financial editor at the Financial Times, Britain’s most important business daily, and, more recently, the business editor at the Guardian, another prestigious national paper.
Her five fellow commissioners include a top executive at a $12 billion British pension fund, the former chief exec at the UK’s largest property development company, a Harvard Business School-trained chief investment officer at an asset management company that sits on top of $61.5 billion in assets, a theologian who spent two decades directing the UK’s biggest church charity, and the deputy general secretary of Britain’s national trade union federation.
“It is crucial to try and understand the developments that have led to the wide gap between high and low pay in recent years,” High Pay Commission chair Hargreaves noted at her panel’s launch, “and the impact this has had on the economy and on society.”
The experts who’ll be helping with that understanding range from Lord Christopher Haskins, the former long-time top executive at Britain’s most prominent food manufacturer, to Andrew Sims, the New Economics Foundation director of policy who has written widely on the importance of setting limits on compensation at a modern economy’s summit.
Also serving on the High Pay Commission’s expert panel: Dr. Kate Pickett, the epidemiologist whose recent co-authored book, The Spirit Level: Why Greater Equality Makes Societies Stronger, may be the best survey yet of the dangers wide gaps in compensation inevitably engender.
The British public seems to already sense these dangers. Earlier this month, to accompany the new High Pay Commission’s launch, the Compass think tank released the results of a new opinion poll on executive pay. Only 1 percent of the British people, the poll found, feel that CEOs should be paid more than £4 million, the equivalent of $6.3 million. British CEOs currently average nearly $7.7 million.
The High Pay Commission will be gathering public comment and conducting interviews and case studies over the next 12 months. The panel’s final report will be due next November. The recommendations in that report figure to be an influential must-read — on both sides of the Atlantic.
Sam Pizzigati edits Too Much, the online weekly on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Read the current issue or sign up to receive Too Much in your email inbox.