Running out of road on exec pay

For a variety of reasons, I've felt a lot less like blogging recently. Some of it is due to the intrusion of real life, but latterly I've realised it's also because I'm not sure what I think. When I first started writing this blog I had a pretty good idea of what I thought needed attention and what I thought some of the solutions might be. As I've blogged before, my orientation within the Corp gov/RI has always been a pretty pragmatic one - I might prefer another economic model, co-determination or whatever, but you have to act within the framework that faces you (whilst pushing for change to it).

As is no doubt obvious, a mixture of the experience of the financial crisis and some further reading, particularly of older Left perspectives on Corp gov, has altered my views quite a bit. I've always thought that the nature of the financial system (especially the delegation of 'ownership' to asset managers) has made effective shareholder oversight difficult. What I didn't grasp was just how reluctant many managers are to challenge management, even when it clearly could be beneficial. Status quo bias is endemic.

Reading further back in Corp gov history it's notable that the idea that shareholders are owners, or should be afforded primary position in terms of influence, was not taken seriously until very recently. As I've blogged previously, Crosland, in his own pragmatic way, says it's not even worth making legal or structural changes since the notional ownership role of shareholders has no serious application in reality. Fast forward and the unions no longer provide the same kind of countervailing power within companies that they did when Crosland was writing, and corporate power generally appears to have strengthened. Therefore some on the left have seen developing the concept of shareholding as ownership as an alternative way to restrain that power.

Labour developed this idea in government, and a common thread can be traced through initiatives such as the Company Law Review, Myners Review, DRRR etc. To reiterate this was a break from previous theory on the Left about corp gov, an arguably stakeholder theory provided a potential alternative in the mid 90s, but a 'shareholders as responsible owners' conceptual approach has dominated since.

In particular it has dominated in the executive pay debate, where a number of difficult problems have been shoveled into the 'shareholders can deal with it' box. Hence the repeated suggestion that the principal problem is 'rewards for failure', and the principal solution put forward is better performance linkage. It has been argued by some on the Left that executive pay is only an issue for shareholders and boards. And it's been argued that shareholders have a particular interest in policing pay, as poor policy and practice can be a proxy for poor governance generally.

There are a number of problems with such an approach, and they are now beginning to make themselves felt. Most obviously, many asset managers don't really care about scale of rewards. They may push on performance linkage but even achieving this means that execs can still push up the size of reward, and that's exactly what happens in practice. Simply stating you are against rewards for failure means you fail to tackle rent extraction, which (IMO) is what happens in practice. And it happens across the board too, so if you are bothered about the pay gap it simply isn't true that poor policy is a proxy for poor governance generally, because most are at it.

We are now in an environment where there is growing concern about the gap between rewards for the executive class the rest of us. I fundamentally believe that if any Government wants to address this they either need to find a way of getting shareholders to change their approach, or they need to make a break with recent policy. Most institutional investors and their representatives at the moment simply won't go into bat to address the pay gap. So either they change, or something else does.

So, to come full circle, I think this is why I am struggling to write on governance stuff currently. I have a sense that any attempt to address executive pay excess may start to pull away at the policy consensus that has existed for some time. But I don't know where we go next. It should be a creative time, really, but my brain isn't quite up to it, yet.

News Intenational statement on hacking, July 2009

This is seriously worth a read. Blogger still not wanting to link, so URL here: http://news.sky.com/home/uk-news/article/15335532

Clive Goodman's letter, moaning that he was being punished for what everyone else was doing (hacking), was sent in 2007.

Also notable that News Corp is making similarly unequivocal statements currently about who knew what and when.

News International has delayed making this detailed statement until all relevant facts have been analysed and checked internally and externally.

News International has completed a thorough investigation into the various allegations made since the Guardian story broke on Wednesday.

This investigation augmented a similar process here following the arrest of private investigator Glen Mulcaire and News of the World journalist Clive Goodman in August 2006.

Perhaps more significantly, the police investigation into Glen Mulcaire and Clive Goodman began in 2005, nine months before the two men were arrested.

Prior to arrest the police conducted live monitoring of both men's activities and also kept the News of the World activity in this area under investigation.

The raids on Mulcaire's premises, on Goodman's premises and on the News of the World office seized all relevant documents and all available evidence.

The police investigation continued after the arrests and all relevant activity was studied and analysed in the context of identifying unlawfulness/criminality.

The police investigation was incredibly thorough.

Apart from matters raised in the Mulcaire and Goodman proceedings, the only other evidence connecting News of the World reporters to information gained as a result of accessing a person's voicemail emerged in April 2008, during the course of the Gordon Taylor litigation.

Neither this information nor any story arising from it was ever published. Once senior executives became aware of this, immediate steps were taken to resolve Mr Taylor's complaint.

From our own investigation, but more importantly that of the police, we can state with confidence that, apart from the matters referred to above, there is not and never has been evidence to support allegations that:

:: News of the World journalists have accessed the voicemails of any individual.

:: News of the World or its journalists have instructed private investigators or other third parties to access the voicemails of any individuals.

:: There was systemic corporate illegality by News International to suppress evidence.

It goes without saying that had the police uncovered such evidence, charges would have been brought against other News of the World personnel.

Not only have there been no such charges, but the police have not considered it necessary to arrest or question any other member of News of the World staff.

Based on the above, we can state categorically in relation to the following allegations which have been made primarily by the Guardian and widely reported as fact by Sky News, BBC, ITN and others this week:

:: It is untrue that officers found evidence of News Group staff, either themselves or using private investigators, hacking into "thousands" of mobile phones.

:: It is untrue that apart from Goodman, officers found evidence that other members of News Group staff hacked into mobile phones or accessed individuals' voicemails.

:: It is untrue that there is evidence that News Group reporters, or indeed anyone, hacked into the telephone voicemails of John Prescott.

:: It is untrue that "Murdoch journalists" used private investigators to illegally hack into the mobile phone messages of numerous public figures to gain unlawful access to confidential personal data, including: tax records, social security files, bank statements and itemised phone bills.

:: It is untrue that News Group reporters have hacked into telephone voicemail services of various footballers, politicians and celebrities named in reports this week.

::It is untrue that News of the World executives knowingly sanctioned payment for illegal phone intercepts.

All of these irresponsible and unsubstantiated allegations against News of the World and other News International titles and its journalists are false.

The Guardian has been selective and misleading in its coverage of the report and investigation by the Information Commissioner.

There has been and is no connection between the Information Commissioner's investigation and the allegation of hacking into telephones or accessing telephone voicemails.

The report concerned the activities of a private investigator who, between April 2001 and March 2003, supplied information to 32 newspapers and magazines including, incidentally, the Guardian's sister newspaper, The Observer, which according to the Information Commissioner was ninth worst "offender" out of the 32.

The information supplied was deemed to be in breach of the Data Protection Act 1998.

When Les Hinton gave evidence to the Select Committee in March 2007, the evidence which emerged during the Gordon Taylor litigation in April 2008 was not known to Mr Hinton or any other senior executive within News International.

Furthermore, we are inviting the Guardian to supply the Metropolitan Police with any new evidence they claim to have.

Since February 2007, News International has continued to work with its journalists and its industry partners to ensure that its journalists fully comply with both the relevant legislation and the rigorous requirements of the PCC's Code of Conduct.

Finally, we would like to make it clear that despite the Guardian suggesting otherwise, the departure of Managing Editor Stuart Kuttner has no connection whatsoever with the events referred to above.

The Guardian were informed of this position from the outset and chose to mislead the British public.

Andy Coulson's legal fees

According to the FT this morning, Coulson's legal fees "to date" have been paid by News International. So presumably that means during time at Number 10 (if there were any)* and since his arrest in July?

More to come, no doubt.

* UPDATE: Been a bit thick here - just remembered that News Intl already confirmed they paid his fees in the Sheridan trial.

Hacking, again

Just a few quick thoughts on the latest Coulson story. It looks like it was just his severance pay, paid out in chunks. I think the timing of the payments is odd (don't you usually get your payoff in one lump, straight away?) and it certainly doesn't look good.

Coulson appears to have given a rather misleading impression to the CMS committee of his financial relationship to NI. Evidence from NI execs is also under scrutiny. See Tom Watson's site - www.tom-watson.co.uk (Blogger being a git about links tonight) - for details on both.

The odd thing is, the rumour that NI had being paying Coulson whilst working for Cameron has been circulating for some time. Kevin Maguire ran a bit in the New Statesman in mid July (see column dated 18th July on NS website). So someone, somewhere, clearly did know this was happening and was trying to get the info out.

And how does the rumour finally get confirmed? - by Pesto. It has to make you suspicious that this means someone at NI was involved which suggests they are really hanging Coulson out to dry. But why?

The politics of phone hacking

It's interesting to note that, before the recent revelations about hacking emerged, it was a common belief on the part of many right-wingers that the allegations against Andy Coulson etc were a) a journo-on-journo obsession and b) politically motivated. Some people were even dumb enough to argue that the whole thing was politically motivated, cooked up by Labour and The Grauniad, which looks very stupid in retrospect. Boris.

Now that I've got my partisan jibe in, I thought I'd relay my own views on this one. Over the past couple of months I've followed a lot of the detail of the hacking scandal. In all of this I can honestly say politics, in the partisan sense, isn't a factor. I'm not bothered if the scandal does damage to David Cameron, regardless of what I think about his judgment in hiring Coulson. I didn't celebrate the closure of The News of the World, with innocent employees given the boot, though nor did I join in the collective misremembering of what was, in large part, a comic. I don't hope the knock-on effects will damage Fox News - I don't like or watch it but am totally comfortable with others doing so. Nor do I want to see Sky damaged, otherwise how will I watch humiliating 7-1 defeats... I would even go a long way defending journos on public interest grounds, even, maybe, employing hacking. But in this case we clearly see that the practice went way beyond that.

I don't deny that some of these factors may have affected others' views of the hacking scandal, but I can honestly say that isn't why I have got interested. For me the issue is the misuse of power and a lack of accountability. News International has had a corrupting influence on politics and the Police. Through the select committee process, we have seen that this is a company that will do anything to avoid accountability. It is only in the last month and a half, when faced by a serious crisis, that it has given any ground. And even now it maybe the case that the company is not playing with a straight bat. In the broader sense of politics, regardless of which parties Murdoch papers and channels support, this is behaviour that any self- respecting lefty should be concerned about.

I am a strong believer that the fish rots from the head down, and that corporate norms are hugely influenced by executive behaviour. If any former or existing NI employees are shown to have misled parliament they need to be made to face the consequences. I am not the sort of lefty that believes in the 'evil-global-megacorp' view of corporate influence on politics. I don't believe that most companies behave like NI. But in order that people do have a degree of trust in the system an example needs to be made in this case.

extremists vs the present

I took a punt on The True Believer by Eric Hoffer recently. It's a series of reflections on how movements like communism and fascism attract adherents, and what kind of people are drawn to them. It's not great as it's very speculative (no underlying research) amd I suspect if it were written today it would vanish without a trace. Analysis has moved on a great deal since the 50s!

Still, it does hit the target quite a bit too (though maybe that's just because it confirms my prejudices about extremists). For example:

Not only does a mass movement depict the present as mean and miserable - it deliberately makes it so. It fashions a pattern of individual experience that is dour, hard, repressive and dull. It decries pleasures and comforts and extols the rigorous life. It views ordinary enjoyment as trivial or even discreditable, and represents the pursuit of personal happiness as immoral. To enjoy oneself is to have truck with the enemy - the present. The prime objective of the ascetic ideal preached by most movements is to breed contempt for the present. The campaign against the appetites is an effort to pry loose tenacious tentacles holding on to the present. That this cheerless individual life runs it's course against a colourful and dramatic background of collective pageantry serves to accentuate it's worthlessness.

The very impracticability of many of the goals which a mass movement sets itself is part of the campaign against the present. All that is practicable, feasible, and possible is part of the present. To offer something practicable would be to increase the promise of the present and reconcile us with it...

And:

The radical and the reactionary loathe the present. They see it as an aberration and a deformity. Both are ready to proceed ruthlessly and recklessly with the present, and both are hospitable to the idea of self-sacrifice.. In reality the boundary line between radical and reactionary is not always distinct. The reactionary manifests radicalism when he comes to recreate his ideal past. Hs image of the past is based less on what it actually was than on what he wants the future to be. He innovates more than he reconstructs. A somewhat similar shift occurs in the case of the radical when he goes about building his new world. He feels the need for practical guidance, and since he has rejected and destroyed the present he s compelled to link the new world with some point in the past. If he has to employ violence in shaping the new, his view of man's nature darkens and approaches closer to that of the reactionary

Another hacking arrest

And another Grauniad scoop. Any suggestions for a collective noun for "rogue reporters"? A Coulson?

Blogroll addition

Zelo Street is well worth a read for well-argued, meejah-related stuff. Plus he regularly points out the gaping holes in much of Guido's blogging.

The pensions divide

A belated plug for a great report from the High Pay Commission on directors' pensions. This is something I've been looking at for years now, and it continues to shock me. If you look at boardroom pension provision, double standards are the rule. Where there are still DB schemes there are rapid accrual rates - 1/30ths very common - where there are DC schemes directors get massive company contributions - 20% not uncommon. This is despite staff in the same company getting substantially worse provision. Given that directors already have higher salaries they build up much bigger pensions. This differential provision simply acts as a turbo-charger.

This is also an area where shareholder oversight has been extremely weak. Very few investors have bothered to take a firm line, meaning that there is no significant pressure on companies to reform. Shareholders may conclude that, yeah, it's unfair but it's only a smallish bit of the overall package. The result is that companies do what they can get away with. I've come to the conclusion that - if Government thinks differential provisions is unacceptable - some sort of legislative intervention is therefore required.

Anyway, here are some headline stats etc from the HPC report:

A FTSE 100 director with a defined benefit pension could be expected to receive a
median annual pension worth £174,963 on retirement.

The annual median pension paid from a private sector defined benefit pension scheme was £5,860 for the rest of the work force.

FTSE100 median accrual rate for directors - 1/30ths (average 41)

Mid250 median accrual rate for directors - 1/45ths (average 47.8)

Typical accrual rate for staff - 1/60ths or 1/80ths

FTSE100 median company contribution rate to director DC scheme - 17% (average 19.4%)

FTSE100 median company contribution to director DC scheme - £88,000

Mid250 median company contribution rate to director DC scheme - 15% (average 16.4%)

Mid250 median company contribution to director DC scheme - £43,000

Average employer contribution to staff DC schemes - 6.1%

Delightful penguins etc

Great comment from Luis Enrique here in response to the argument a 'greed is good' culture is a backdrop to this week's riots:

Where and how does society promotes those values? In the films, telly programs, books and newspaper articles I read, all those values are portrayed as bad. Jim Carey, for instance, always starts out a career oriented monster but then some delightful children/penguins teach him the error of his ways.

I feel exactly the same. You generally cannot watch a mainstream film without getting the message that your family and friends are far more important than careers and material possessions. What's more this message is embedded in a story, a narrative, rather than just a 15 second advert, so it potentially ought to have greater pull. The messages we are sent about the value of material stuff are mixed to say the least.

Some other random thoughts. Personally, I think that lots of young kids got involved in this stuff primarily because a) it is fun (something no-one seems to want to acknowledge) and b) they saw others doing it and getting away with it. Herdlike destructive behaviour that, briefly, looked to participants like something they could get involved with, cost-free.

By coincidence, as my bus home usually goes down Rye Lane I ended up right where the violence flared up in Peckham on Monday night. The kids there - and they were mainly pretty young - did not look angry, they looked excited. And I felt that atmosphere that I have felt before in big crowds, be it on a demo or at football or whatever, that if just one or two people start something off, everyone else will pile in. Once I saw that I immediately thought it would definitely kick off and that I should get out of the way.

So, again just my personal view, I suspect that - Tottenham aside - there isn't much worth 'learning' from what just happened. I can't really see how we can address the fact that young people (especially young blokes) get a kick out of smashing stuff up if they can get away with it, without resorting to some pretty draconian measures that we won't need the vast majority of the time.

Oddly, despite the fact that they smashed up our local Tescos, and the nearest main shopping street, I don't really feel any anger about the riots. Maybe it's because I've got other things to be angry about currently, but I suspect a lot of people now expressing outrage were glued to rolling news on Monday, when it looked like the news montage section used to illustrate society collapsing that you see in dystopian sci-fi/horror films. ho hum.

It's too late for empty rhetoric. It's a riot.

Crackhouse - Consolidated

Libertarian socialism, corporate power and governance

It's an obvious blindspot spot of Bloggertarians/glibbertarians/swearyTorytarians that they typically have little to say about corporate power. Or rather their arguments take the 'if you don't like company X don't shop there' form, as if consumer 'exit' has enough power to address issues like, for example, escalating executive pay. Personally I think it's hard to take a 'libertarian' seriously if they have nothing useful to say about challenging corporate power, but hey.

I was reminded of this when reading this today. It's not a great book IMO, but it is representative of a thread within the Left that was democratic, socialist and libertarian. And, most importantly, it had something to say about the nature of work, and power in the workplace. Here are some comments about the nature of power:

In the large enterprises, legal ownership of the means of productions has become separated from the management and has lost importance. The big enterprises are run by bureaucratic management, which does not own the enterprise legally, but socially... They administer things and persons, and relate to persons as to things. This managerial class, while it does not own the enterprise legally, controls it factually; it is responsible, in an effective way, neither to the stockholders, nor to to those that work in the enterprise. In fact, while the most important fields of production are in the hands of the large corporations, these corporations are practically run by their top employees. The giant corporations which control the economic, and to large extent the political, destiny of the country constitute the very opposite of the democratic process; they represent power without control by those submitted to it.

I might not agree with this, since I do think we have the potential to control the corporate sector via political power, just that our politicians seem to have lost the confidence to do this. However, in practice, politics too often works to legitimise corporate power, either by not challenging it (see the way the exec pay controversy is redrawn as being just about rewards for failure) or by appointing business leaders to tackle 'difficult' issues as if they are the only group in society able to 'do' anything. And I would struggle to argue strongly against the view that legal ownership doesn't tell us much about who really has power.

I wonder what libertarian Righties would say. Notably Ayn Rand fan Alan Greenspan seems to think that autocratic corporate governance is a necessary evil. A similar argument i have seen is the 'all is for the best in the best possible worlds' view that if a better (ie more efficient model) were available it would have emerged and been backed by shareholders. So I'm not clear they consider there is any problem.

Anyway, here's a bit more from Fromm (hehe) on the general approach to be taken.

[I]f a choice has to be made between greater production on the one hand, and greater freedom and human growth on the other. the human as against the material value must be chosen. In socialist industrialism the goal is not to achieve the highest economic productivity, but to achieve the highest human productivity. This means that the way in which man spends his energy, in work as in leisure, must be meaningful and interesting to him. It must stimulate and help to develop all his human powers - his intellectual as well as his emotional and artistic ones.

Now again I might not agree with this, but it is at least an attempt to think about work and freedom from the point the point of the worker, rather than simply in terms of production (Robert Lane's the Market Experience has a well argued case for this).

And here are some more comments, admittedly pretty vague, about the objectives of this approach to socialism:

Humanistic socialism is the extension of the democratic process beyond the purely political realm, in to the economic sphere; it is political and social democracy. It is the restoration of political democracy to its original meaning: the true participation of informed citizens in all decisions affecting them.

Extension of democracy into the economic sphere means democratic control of all economic activities by participants: manual workers, engineers, administrators, etc. Humanist socialism is not primarily concerned with legal ownership [a bit Croslandite eh?], but with social control of the large and powerful industries. Irresponsible control by bureaucratic management representing the profit interest of capitalism must be replaced by administration acting on behalf of, and controlled by, those who produce and consume.

He goes on to say that shareholders would continue to receive compensation for the use of their capital, but no rights of control or administration, and suggests practical reforms such as 25% employee representation on 'decision-making boards'.

This approach, and the limited proposals put forward, may be impractical, but they are an attempt to deal with power and freedom at work, where we spend a lot of our time. If libertarians don't think there is much scope, or need, for reform here then I'm not sure why we should take them too seriously when they make criticisms of the political world. More broadly though, I think there is plenty of scope currently for the Left to have a look back at its own libertarian history. At the very least it shows us what limited ambition the Right version has.

Excusing social envy and resentment

"[I]t is sometimes said that one is doing something disgraceful, and merely pandering to the selfish clamour of the mob, by taking account of social envy and resentment. This is not so. These feelings exist, amongst people not morally inferior to those who administer such high-minded rebukes; and they are quite natural. It is no more disgraceful to to take them into account than many other facts that the politician must attend to - such as the greed of the richer classes, who claim that they must have higher monetary rewards and reduced taxation as an incentive to greater effort, patriotism being evidently not enough."

Err... Crosland again.

'Belatedly' - the defining theme of David Cameron?

Reading a report in the FT about the rioting, I spotted the word "belatedly" in relation to David Cameron's response. It's a word also used a lot in terms of his response to the phone-hacking scandal and the NHS reforms. I think it is becoming a perception - at least in the commentariat - of his style of government.

The Right (understandably) ranks his ability to put on a good public performance. But it is noticeable that now for the third time on a big issue this has come after a prolonged period of drift. One to keep an eye on.

US influence on UK corporate governance

A few years back when I was still at the TUC, I went to a conference on globalisation organised by the DTI for policywonkers. There was one session that had relevance to corporate governance and I remember saying that the shifting asset allocation of institutional investors, away from home markets, would likely have an influence on UK corporate governance. US investors, likely to be responsible for the main block of new ownership of UK shares, might take a different view to that of domestic investors. Lead balloon time. I felt like I was being viewed as numbskull protectionist (which I'm not, honest) but I was only suggesting what might occur.

Well, a few years later I think we are starting to see it happen, albeit in rather trivial terms so far. As I've blogged previously, the position of some US investors (and, I think, some non-UK European investors) on resolutions seeking to reduce the notice for calling meetings is already showing up in voting data. The average vote against this type of resolution this season is significantly above the average vote against a director or an auditor appointment. Now you pays your money and all that, but this doesn't make any sense to me. More importantly, I think it is a further distortion of the signaling function of voting, a point I think is still missing from the stewardship debate. (My point in a sentence - if you have concerns but still vote in favour, your signal to the market is misleading).

So far this hasn't mattered too much at a company-specific level. As far as I can see only two companies - Hammerson and Blacks Leisure - have actually lost the vote on such a resolution, and in the latter case this seems to be the result of Mike Ashley dicking about. But it's not the only issue where this seems to be happening. I've also seen some high votes against political donation resolutions where the company has said it doesn't make party political donations (which, as we know, is the case for the vast majority of UK companies). Trawling through public voting data, we can see that again it isn't UK institutions causing this.

More significantly, there are now some pretty stonking votes against resolutions relating to share issue authorities, including at least two or three defeats (Investec most recently). This is a slightly different case, as certainly some UK investors will take the same stance, but the votes against these types of resolutions do seem to have gone up. But again, having trawled through a fair bit of voting data, I don't believe it can be UK institutions in the main driving it. I'm interested to hear what others think.

Of course you may argue that none of this matters. If you believe in a liberal market for corporate control you can't really moan about the 'wrong' people with the 'wrong' views ending up owning UK public companies. But I do think is something we need to keep an eye on. For example, what if US mutual funds, not known for their hard line on executive compensation, become a bigger influence. What message will they send UK PLC boards about pay restraint? If the UK is going to stick with shareholder oversight as a means to address executive pay inflation this may be a problem we need to think about in the future.

It's potentially another significant issue for the UK's corporate governance model to address.

Unelected oligarchy

Worth a read.

Performativity

A good bit on S&M about this.

Corporate monarchy

Is it just me, or isn't it a bit odd to leave the closing speech at a conference about corporate governance to someone whose position in society is wholly determined by who their parents were?

I'm a totally half-hearted republican. I don't agree with monarchy in principle, but I spend no time thinking about it/doing anything about it because I consider it to be pretty irrelevant. I have no interest in what the Royal family do or say, but have no negative feelings about them. And I can see that Princes Charles seems to mean well, in the manner of a million aristos before him.

But surely the idea of hereditary power and privelege stands in total opposition to the aims of corporate governance, which seeks to ensure that positions are won on merit, and individuals are accountable.

I mean, imagine a FTSE100 board allowing the appointment of a chief executive who just happened to be son of the chair. It would never happen, shareholders would challenge it head on.

Revisionism

A couple of short snippets from The Future of Socialism on the need to rethink.

[T]oday, conservative or indolent-minded people on the Left, finding the contemporary scene too puzzling an unable to mould it into the old familiar categories, are inclined to seek refuge in the slogans and ideas of 50 years ago. But Keir Hardie cannot provide... the right focus with which to capture the reality of the mid twentieth century world.

and...

[W]hen the wrongs were so manifest, we all knew what to do, and where the enemy was, and what was the order of battle; it was exhilarating to fight for such clear-cut and obviously righteous aims. But now the certainty and simplicity are gone; and everything has become complicated and ambiguous. Instead of glaring and conspicuous evils, squalor and injustice and distressed areas, we have to fuss about the balance of payments, and incentives, and higher productivity; and the socialist finds himself pinioned by a new and unforseen reality.

Personally I think we need another period of revisionism on the Left, and this must involve going beyond New Labour's view of what was right. Tony Blair cannot provide the right focus for the problems of the early twenty-first century world.

In the bit of the world that I inhabit what I see is the emergence of a plutocracy, driven in no small part by the continuing rise in executive pay. Labour must challenge this, because no-one else will. And to do so must involve an unprejudiced look at what our recent attempts to rein in executive pay have achieved. We must, in particular, get past the dominant idea (dominant because it is uncontroversial and is inherently part of the existing theoretical approach) that the principal problem is 'rewards for failure'. Clearly this must be dealt with, but the much, much bigger and more difficult problem is to address the increasing amount of money extracted by the executive class from public companies. To answer this problem with the slogans of the last decade "more disclosure, greater shareholder oversight" is simply to repeat the failed approach of recent experience.

I don't claim to know what the answer is. But I am pretty confident that a purely market solution - relying on the 'owners' to police pay because it is in their 'self-interest' - is a dead end, due largely to the nature of ownership and the owners themselves. Labour needs to start some deep thinking about this if it wants to make a difference.

A cheeky argument against annual elections

There's an interesting claim from Hermes in this week's Financial News that the boardroom coup at Eurasian earlier this year was only possible because the company had instituted annual elections.

So what actually happened? Two directors - Sir Richard Sykes, the SID, and Ken Olisa - were voted off the board (two others stood down ahead of the AGM). But was this due to annual elections? Not in the case of Sykes. Go back to the 2008 AGM report here (PDF) and you can see that Sykes and Olisa were up for election. Looking at 2009 and 2010 AGM statements we can see that Olisa also faced re-election in 2009, but Sykes has not faced re-election since. So, on the three-year cycle that was the norm before the Code was revised, the SID would have been up for election in 2011 in any case and so could have been voted off anyway. Incidentally, one of the directors that stood down would also have been due to face re-election this year.

Personally I think the important point about Eurasian is that it's another example of dodgy governance where there's a controlling shareholder (or in this case group of shareholders). In this case it the problems were magnified by the tiny free float. In that case the problem we should be tackling is listing requirements, rather than refighting the annual elections argument.