Today the news is all about RBS Chief Exec Stephen Hester waiving his £963,000 shares-only bonus.
This comes after enormous media pressure and an impending Commons debate on whether he's worth such a rewards. In that face of villification and the unpicking of his abilities, Hester caved, saying he feared 'pariah' status.
The reality is that Hester's million pound present is not the problem. It's a drop in an oceon of zeros surfed by every Fat Cat in town. Bob Diamond of Barclays is in line for a cool £10 million. Note that Barclays signed up to the govt's Merlin Agreement - part of which was an agreement to curb bonuses.
Outside banking, these sorts of nine figure boons are par for the course.
Here's the thing. Let's not lynch one greedy man-is-an-island banking boss. Let's look at a culture that allows people to earn this sort of money for working no less hard than those on a fraction of the wage. Hester surely does not believe that his work is more essential or stressful than that of a paramedic in the UK, which is £29,284.
George Monbiot has written this excellent article on why now is the time for the introduction of a Maximum Wage.
Don't forget, we only got the Minimum Wage in 1999, with strong opposition from business and the Tories. It seems ludicrous now that only a few years ago you could be paid 50p/hour if your boss chose. It is equally ludicrous that there are people earning 1000 times the median national wage (Monbiot).
Dan Ariely and his colleagues have shown us that, above a certain level of income, more money doesn't actually improve performance [watch this video or have a look at this]. The notion that the promise of big financial rewards is causally linked to better output is a fallacy. We also know that the sort of inequality this high pay culture is contributing to has horrendous repercussions for society as a whole [read this book].
To me, the Maximum Wage scores pine-fresh on the Common Sense Sniff-o-meter. But let's take a quick tour of the arguments against.
In his 2009 essay for the Institute of Economic Affairs, Tom Papworth said this:
"It is based upon two related errors: that earning more than a certain amount is unnecessary, excessive and even obscene; and that there should be a certain proportion between individual earnings. At the root of these lies the belief that there is a decent amount that people should earn, above which one is earning too much. Its origins lie in a puritanical rejection of wealth. A rich man, as we all know, cannot enter the kingdom of heaven, and when one is seeking to make an egalitarian heaven on earth, there is no room for the rich. Basically, it is institutionalised envy."
This argument, which seems to be what's colloquially known as "you're all just haterrrrz" doesn't really deserve to be called an argument at all. He's neatly overlooked the idea that it might not be envy at all, but a truly held belief and reasoned opinion that the sort of wealth disparity we have today is morally/ethically unacceptable and that yes, there is an obscenity to it given the dire poverty some in the world live in. Swarovski-studded baby prams are pretty bloody obscene.
He gets worse:
"There is no reason, functionally or morally, why a person should not enjoy any amount of wealth. Wealth is not limited, after all. There is no lump of wealth than needs to be shared out. If you want more money you can make more money: work harder; take more successful risks; use information more efficiently and effectively than others."
Would some nice international volunteering project like to send Mr Pap-worth to Darfur for a month or two? Rural China? Ex-mining towns in the UK? Perhaps he forgot about the majority of the world in the 5 minutes he took to write this piece, and was only thinking of Western white people with full mobility based in one of the richest cities in the world who had the fortune of good education.
He goes on to mention the C-word... Communism... as the big bad poster boy of ideas like this one. But that's highly simplistic; it's not Stalin or the astronomical inequality we have now. Maximum wage policy isn't about equalising all wages, it's about narrowing the gap. It isn't about impoverishing and homogenising people; it's about saying let's spread all this wealth around a little, and you can keep your nice house, and probably your country cottage too, but possibly not all 3 Jags.
Mr Papworth wrote his article in response to the launch of a High Pay Commission. The Commission (set up by Compass, a democratic left pressure group) ended in late 2011 and recommended the following measures:
The commission calls for a number of reforms, including a "radical simplification" of executive pay, putting employees on remuneration committees and publishing the top 10 executive pay packages more widely. [sources below]
These ideas are very much in the public domain at the moment, but will any of them actually happen? And if they do happen, will they have any effect? One of the main arguments within this agenda is strategy; legislation or self-regulation and transparency? I know which I have the most faith in.
One of the other main objections is that the 'talent' will go elsewhere. This is basically your war-on-terrorism argument: create a bogeyman scenario and everyone will roll over and say ok. It is posturing. We would potentially lose some executives, but hardly all. These are people with millions in the bank and homes and families here, in the UK. Let's be realistic.
My main question is what's happened to the ideal of being the vanguard? What's with all this lemming-like behaviour? We're terrified that if we make life a little less cushy for the wealthy here, they'll run off to where it's more cushy. But what if that haven changed its' laws too? It's called leadership.
Maybe one day the Maximum Wage will seem as much a part of common sense as the Minimum Wage.
Sources:
BBC News on Hester's decision here
RBS performance under Hester here
Institute of Economic Affairs, Pap-worth against the maximum wage idea here
More on the Merlin Agreement, including why it's 'toothless' here
The Equality Trust, fighting for a more equal society here
High Pay Commission here
BBC report on HPC here
This comes after enormous media pressure and an impending Commons debate on whether he's worth such a rewards. In that face of villification and the unpicking of his abilities, Hester caved, saying he feared 'pariah' status.
The reality is that Hester's million pound present is not the problem. It's a drop in an oceon of zeros surfed by every Fat Cat in town. Bob Diamond of Barclays is in line for a cool £10 million. Note that Barclays signed up to the govt's Merlin Agreement - part of which was an agreement to curb bonuses.
Outside banking, these sorts of nine figure boons are par for the course.
Here's the thing. Let's not lynch one greedy man-is-an-island banking boss. Let's look at a culture that allows people to earn this sort of money for working no less hard than those on a fraction of the wage. Hester surely does not believe that his work is more essential or stressful than that of a paramedic in the UK, which is £29,284.
 |
| Thinking Girl's Crumpet George Monbiot |
Don't forget, we only got the Minimum Wage in 1999, with strong opposition from business and the Tories. It seems ludicrous now that only a few years ago you could be paid 50p/hour if your boss chose. It is equally ludicrous that there are people earning 1000 times the median national wage (Monbiot).
Dan Ariely and his colleagues have shown us that, above a certain level of income, more money doesn't actually improve performance [watch this video or have a look at this]. The notion that the promise of big financial rewards is causally linked to better output is a fallacy. We also know that the sort of inequality this high pay culture is contributing to has horrendous repercussions for society as a whole [read this book].
 |
| The Commonsense Sniff-o-meter on youcanarguewithstupid: rotten haddock - eggy - pine fresh |
In his 2009 essay for the Institute of Economic Affairs, Tom Papworth said this:
"It is based upon two related errors: that earning more than a certain amount is unnecessary, excessive and even obscene; and that there should be a certain proportion between individual earnings. At the root of these lies the belief that there is a decent amount that people should earn, above which one is earning too much. Its origins lie in a puritanical rejection of wealth. A rich man, as we all know, cannot enter the kingdom of heaven, and when one is seeking to make an egalitarian heaven on earth, there is no room for the rich. Basically, it is institutionalised envy."
He gets worse:
"There is no reason, functionally or morally, why a person should not enjoy any amount of wealth. Wealth is not limited, after all. There is no lump of wealth than needs to be shared out. If you want more money you can make more money: work harder; take more successful risks; use information more efficiently and effectively than others."
Would some nice international volunteering project like to send Mr Pap-worth to Darfur for a month or two? Rural China? Ex-mining towns in the UK? Perhaps he forgot about the majority of the world in the 5 minutes he took to write this piece, and was only thinking of Western white people with full mobility based in one of the richest cities in the world who had the fortune of good education.
Mr Papworth wrote his article in response to the launch of a High Pay Commission. The Commission (set up by Compass, a democratic left pressure group) ended in late 2011 and recommended the following measures:
The commission calls for a number of reforms, including a "radical simplification" of executive pay, putting employees on remuneration committees and publishing the top 10 executive pay packages more widely. [sources below]
These ideas are very much in the public domain at the moment, but will any of them actually happen? And if they do happen, will they have any effect? One of the main arguments within this agenda is strategy; legislation or self-regulation and transparency? I know which I have the most faith in.
One of the other main objections is that the 'talent' will go elsewhere. This is basically your war-on-terrorism argument: create a bogeyman scenario and everyone will roll over and say ok. It is posturing. We would potentially lose some executives, but hardly all. These are people with millions in the bank and homes and families here, in the UK. Let's be realistic.
 |
| The cowardly lion from the Wizard of Oz |
Maybe one day the Maximum Wage will seem as much a part of common sense as the Minimum Wage.
youcanarguewithstupid
Sources:
BBC News on Hester's decision here
RBS performance under Hester here
Institute of Economic Affairs, Pap-worth against the maximum wage idea here
More on the Merlin Agreement, including why it's 'toothless' here
The Equality Trust, fighting for a more equal society here
High Pay Commission here
BBC report on HPC here
