Capping executive pay

It's fair to say that today has not been an unblemished success for Labour. Nonetheless, despite everything, there is something encouraging in what Corbyn has been saying about executive pay.

First off, let's tune out the noise. Much of the politico commentariat was united today in guffawing at how obviously dumb and wrong-headed Corbyn was to float such a stupid idea as a maximum wage. A number of these people were also commenting sagely yesterday about the wisdom in Dominic Cummings' take on dynamics of the Brexit vote victory. Interestingly, Cummings identifies the financial crisis, and the damage it did to the standing of the corporate elite, as one of the three tailwinds that helped the Out vote, and explicitly highlights unjustified executive pay. But I guess that was yesterday.

The last couple of years has taught me that most political commentators know feck all, and it's too difficult to identify who might actually be on the money, so it's largely worth ignoring them. That they are united in derision about a sledgehammer policy on top pay merely demonstrates what a closed circle - an echo chamber if you like - political commentary is. I think they are again massively out of touch on this, but hey ho.

Second, let's remember some recent figures. In 2013 in Switzerland a referendum proposal to impose a mandatory maximum pay ratio of 12 to 1 was defeated, basically 2:1. But a third of people backed it. In Switzerland, the bankers' bolt hole. A poll from Sept 2015 enthusiastically tweeted by one of the Guido Fawkes today crew showed a slim majority opposed (44% opposed, 39% in favour) to a maximum £1m a year wage. So a slim majority for the status quo over a very radical change in direction, before anyone has even started trying to campaign - sound familiar? And a CLASS poll in Oct 2014 found a 2:1 majority in favour of a maximum pay ratio of 65:1. I don't look at that set of figures and conclude that this is an unwinnable fight, and I do proper pessimism.

Thirdly, it's a trivial point, but the "mad idea" outer boundary has now moved. Putting workers on rem comms, for example, now appears a bit more reasonable. Disclosure of pay ratios, rather than enforcement of them, seems a bit... well... weedy now, doesn't it? I mean even the Tories support that now.

Fourthly, linked to this, chucking out a mad/extreme idea like this, does force people to react and poses the question - "well, what would you do then?" I saw quite a few people asking on Twitter today - what about actors? what about footballers? Well, yeah, what about them? I don't think most people would give a toss if the highly paid in others sectors got hit too. I wouldn't. And to be honest I can't get enough of Right-wing policy wonks publicly arguing that there isn't really a problem with executive pay and that it's outrageous in principle to try to limit pay at the top.

All that said, I don't think that a maximum wage is the right way to go, though I think it might be more popular than sensible people think. (Also, maybe it's better for mad ideas to be floated by shadow ministers rather than the leader). Maybe something like a maximum internal pay ratio might be a more sensible but still radical proposal, as it would pull up those at the bottom rather than just whack those at the top, and so would likely be more popular. But as I've said before, I'm a bit lost as to where  executive pay policy goes next - I'm just pretty sure it won't be more of the same.

As exhibit A here's what Corbyn actually floated as ideas on top pay in in his speech:

… We could allow consumers to judge for themselves, with a government-backed kitemark for those companies that have agreed pay ratios between the pay of the highest and lowest earners with a recognised trade union.

… We could ask for executive pay to be signed off by remuneration committees on which workers have a majority.

… We could ensure higher earners pay their fair share by introducing a higher rate of income tax on the highest 5 percent or 1 percent of incomes.

… We could offer lower rates of corporation tax for companies that don’t pay anyone more than a certain multiple of the pay of the lowest earner.

I don't see anything about greater performance linkage, more corporate disclosure or beefing up shareholder powers. Perhaps this is just Labour going nuts, as many commentators would have us believe. But personally I think in the coming years we're going to see more ideas on this sort of territory. The old regime is rotten, and the punters know it.