High pay “corrosive” to UK economy: High Pay Commission

According to analysts, the British government is likely to act to curb boardroom pay, as an influential group close to the business secretary Vince Cable, publishes proposals to reduce the pay gap.

Warning that high pay was "corrosive" to the UK economy, the High Pay Commission has called for greater transparency in the fixing of executive pay and said employees should sit on remuneration committees.

The commission's recommendations come as part of a  comprehensive report that urges the government to take action on top salaries.

According to the report, executive pay had risen sharply – the pay of the head of Barclays had shot up nearly 5,000 per cent in 30 years – while average wages had risen just three-fold.

The commission was set up by Compass, a left-wing pressure group funded by Joseph Rowntree Charitable Trust.

Political observers said on Monday that the government was seriously considering the report.

The commission has outlined 12 recommendations to tackle high pay and has called for the following reforms:

• Greater transparency in executive pay calculation to end the "closed shop" on pay decisions, as at present people did not quite understand until it was too late how a vast salary – often composed of as many as seven different elements was worked out.
  
• Remuneration committees to have employees as members, a move included in the government's own consultation remit.
  
• Publication of the top 10 executive pay packages outside the boardroom.
  
• Publication of a pay ratio between the highest paid executive and the company median.
  
• Mandatory revelation of total pay earned by the boardroom members.
  
• Establishment of a new national body for monitoring of high pay

The High Pay Commission also says the salary for the post of chief executive at the now partly state-owned Lloyds Bank had increased by more than 3,000 per cent since 1980 to over £2.5 million.

The commission said this was 75 times the average Lloyds employee's salary, as against in 1980 when it was just 13.6 times the average.

A spokesperson for Lloyds Banking Group said, the High  Pay Commission's figures were flawed, as they had compared the average basic salary of the employees to a remuneration package awarded to the CEO that included salary, bonus and benefits. He added this resulted in their reaching an inflated number that was entirely unrepresentative of the truth.

Average wages in the UK today are £25,900 per year, as against £6,474 in 1980 - a three-fold increase, according to the commission.

According to High Pay Commission chairwoman Deborah Hargreaves, there was a crisis at the top of British business and it was deeply corrosive to the economy.

She added, when pay for senior executives was set behind closed doors, it did not reflect company success and was fuelling massive inequality, it represented a deep malaise at the very top of British society.

She said the British people believed in fairness and at a time of unparalleled austerity, one tiny section of society - the top 0.1 per cent continued to enjoy huge annual increases in pay awards.

She added that everyone, including each of the main political parties, recognised that there was a need to tackle top pay.