notes from JK

Speech: A High Pay Commission

I copy below the speech I presented in support of this motion for a High Pay Commission, which was carried but only with a Labour wrecking motion (supported by the Conservatives) at full council 28th January 2010:

The top allowance for a councillor in this chamber is only 3.4 times more than the lowest councillor allowance. In terms of allowances, we are a fairly equally rewarded bunch, unlike much of society.

According to Compass, the average ratio of chief-executive to employee pay is 128 times, and several sources agree this has at least doubled in the last decade. In some FTSE 100 firms the pay ratio is now over 1,000 times.

Why limit high pay? Because it’s unfair, it doesn’t create better results and the gap between top and bottom pay is getting worse.

This motion really calls for what is fair pay for all. Shareholders and boards of directors have dramatically failed to reign in the widening pay gap. On pay, both private companies and public services have had long enough to get their house in order.

Some have dealt with the pay gap: A fixed ratio of top and bottom rates of pay is used by successful firms including Toyota, Whole Earth Foods and the St Lukes advertising agency. They do this because there is a good business case for limiting the ratio between top and bottom levels of pay.

Think of companies who have let our country down recently… the banks for example.

20 years ago the pay difference between a bank Chief Exec and next level down was only 2-3 times. Now the ratio between chief and deputy is 20-30 times, imagine what it is between Chief Exec and the lowest paid bank employee. Can we say we’re happy with how banks have conducted themselves? They’re now a national disgrace.

Such pay gaps lead to greater unfairness in our society. We know unfair differences in family income are a key factor that contributes to many societal problems.

The idea of a High Pay Commission to limit top pay is backed by the best business research. For example, Jim Collins for his bestselling book “Good to Great” conducted 112 analyses on pay ratios alone. He found that:

“…the idea that the structure of executive compensation is a key driver in corporate performance is simply not supported by the data.”

And he added:

“The right people will do the right things… regardless of the incentive system.”

Andy Law, from the St Lukes ad agency says:

“When you are exhorting people to co-operate with each other and to trust each other [at work], to impose an unequal system (as is most commonly done) is completely contradictory.”

If I haven’t convinced you so far, let’s try an example. Let’s think about this in a setting we can all relate to: the family. We were all children once…. In your family, how would you have felt if a brother, sister or cousin was awarded 128 more sweets than yourself for winning a game or doing a task particularly well?

You would be outraged with the unfairness and would feel dejected.

Such a huge gap in reward would not be motivating. Other than the one person gaining the disproportionately large reward, the rest would carry on demotivated. It isn’t fair.

Fairer pay is the hallmark of effective organisations, it’s good for business and good for society. The High Pay Commission we propose would be a step toward a more just, fair and balanced society – one in which all our families receive their fair reward for their hard work. Please support this motion.

Online Sources:

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