Let’s have a proper debate about pay at the top. I don't mean the Polly Toynbee style combination of moralising and inverse snobbery (which I actually think is counter-productive), let's focus on how top pay really works and what it can and cannot achieve.
There are myths that need to nailed once and for all - like that it is (or even can be) linked to performance. Performance of what? Linking rewards to share price has created incentives for the board to manage one indicator, even if that means encouraging them to delay projects, embark on wasteful M&A activity (PDF) or other counterproductive behaviour, rather than just getting on an running the business. And in any case trying to incentivise certain types of behaviour might overwhelm intrinsic motivation to do the right thing.
There's also the problem of the legitimising effect of excessive remuneration. High executive pay also creates the (false) impression that business success is built upon the actions of a small number of brilliant people in the boardroom. And unfortunately I think the shareholder approval vote (and the fact that so few pay policies are voted down) can actually provide a fig leaf - if 'shareholders' aren't bothered by high pay it can't be a problem.
So if shareholders (by which we really mean fund managers) can't police pay effectively, is it time to think of other ways of dealing with it? So why not explore the ideas suggested right at the end of this paper – what about limiting pay to a set % of either market value or profits? Is a maximum pay differential within companies a bad idea? And why not bar companies from providing differential pension provision to the boardroom and the shopfloor?