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Stratospheric increases in pay are damaging the UK economy

Not my words, but the words of the High Pay Commission. After 12 months of study, this body, set up with charity funding to look at the pay of top executives, said that: “Stratospheric increases in pay are damaging the economy – distorting markets, draining talent from key sectors and rewarding failure”

Time to turn off the tap on executive pay increases?

The study compared Directors’ pay in the top UK companies between 1979-80 and 2009-11. It found that while average wages in the UK as a whole had risen from £6,474 in 1980 to £25,900 today – an increase of 300% – the pay of top executives has risen by over 4,000% on average.

The report looks at a number of individual examples. John Varley, who was chief executive of Barclays saw his income rise to £4,365,636 which was 169 times what the average worker earns, and was an increase of 4,899.4%. Back in 1980 the top pay at Barclays was £87,323 which was only 13 times the UK average.

The report by the High Pay Commission, entitled: Cheques with Balances: Why tackling high pay is in the national interest, said: “There appears to be little truth in the myth that pay must escalate to halt a talent drain in executives. The growing pay gap between the top 0.1 per cent and everyone else is increasing public disillusionment, damaging trust and fuelling the view that business leaders are in it for themselves.”

Deborah Hargreaves, chair of the High Pay Commission, said: There’s a crisis at the top to British business and it is deeply corrosive to our economy. When pay for senior executives is set  behind closed doors, does not reflect company success and is fuelling massive inequality, it represents a deep malaise at the very top of our society.

“The British people believe in fairness and, at a time of unparalleled austerity, one tine section of society – the top 0.1% – continues to enjoy huge annual increases in pay awards.”

The Commission called for a number of reforms, including a “radical simplification” of executive pay, putting employees on remuneration committees, publishing the top 10 executive pay packages more widely, forcing companies to publish a pay ratio between the highest paid executive and the company median, and making firms reveal the total pay figure earned by executives.

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