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August 09, 2016

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Mark

There are two more reasosn why the right (and indeed everyone else) should be concerned about wage inflation among listed-company CEOs, and the one percent generally.

First, while they represent a small proportion of the economy, their growing incomes enable them to own a large and rising percentage of the country's net worth. As their bank balances swell faster than those of the rest of the population's, so their ability to bid up the value of assets and positioned services is enhanced, in turn diminishing the capacity of the rest of us to compete.

Whether it's London property, private school education, decent legal representation or anything else the middle classes until recently believed they could provide for themselves and their offspring, increasingly the global elite has bid it out of reach. This reduces social mobility and equity.

Second, as the labour of FTSE100 CEOs becomes increasingly expensive, so it becomes affordable to fewer firms. VC-backed start-ups, small-cap growth businesses and social enterprises that could once afford top talent increasingly can't. This is bad for all of us as those firms create disproportionate amounts of jobs, tax income and common goods respectively.

BCFG

Another reason we should be concerned by this is that what makes good policy for the company is not necessarily good for the customer. So for example, sacking workers or reducing their terms and conditions just passes the cost to society at large. Also, for example, if in order to be successful a utility company needs prices to be sticky going down and fluid going up then the company can can profit from this but the consumer base could end up in fuel poverty. So what is good for the company is bad for everyone else!

We should also challenge the Adam Smith Institute ideology that the reason someone gets paid millions is because the CEO is so fantastic they are simply worth this amount. The Adam Smith Institute are nothing but apologists for Kleptocracy. And Kleptocracy is what we have.

The reason the right cannot challenge the pay of directors is because in the final analysis the right wing argument comes down to just one thing, these people are simply better than you mere mortals and deserve all they get. If they concede on high pay they basically have to reject their whole ideological foundation.

So when you scratch the surface the right are nothing much more than shills for the rich.

Jeffrey Stewart

First, I thought you read and assimilated Marx. If so, then you're fully aware that "market failure" is nonsense.

Second, you write, "Many Marxists are relaxed about this..." Really? How many Marxian economists do you know? How many do you correspond with? Please let me know if this is just a slur against Marxian economists or you actually have survey data to support your assertion.

SheepCat

What I don't understand about high CEO pay is that executives don't exclude each other in quite the same way as footballers do:
Can a single £5m executive really achieve more for the company than a team of 10 x £500k executives?

It might be argued that there has to be one person with whom the buck stops.
This may or may not be true (I'm not an executive). But we don't even seem to hear much about companies trying out more consensual decision-making.

The cynic might say that the reason a single £5m executive is so effective, is that he shmoozes with his old Eton chums, some of whom are now running the country, and is therefore able to influence the lay of the playing field.

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