The Labour government in response to the public outrage on bankers' pay promised to increase transparency by introducing legislation that would force banks to reveal the pay of their top earners. It wouldn’t name and shame but it would, for example, show how many people were earning more than £1 million or more than £10 million in any one bank.
The Labour government in response to the public outrage on bankers’ pay promised to increase transparency by introducing legislation that would force banks to reveal the pay of their top earners. It wouldn’t name and shame but it would, for example, show how many people were earning more than £1 million or more than £10 million in any one bank.
This step towards greater transparency in terms of pay is exactly the sort of policy that the High Pay Commission will be looking at in its exploration of high pay in the private sector. Particularly as greater transparency may be part of the answer, in other countries such as Sweden and Germany individuals and companies have to reveal who gets paid what and as a result pay differentials are not as great as in the UK.
However, equally it can be part of the problem, if it is not executed well, as case studies show that when individuals know how much their contempories are paid it can push the wages ever upwards as happened at the University of California.
Over the coming year the High Pay Commission will look into these issues in an open public debate. There is a significant public interest in the issue of high pay, particularly in relation to bankers and it is therefore concerning that the coalition government seems keen to kick this policy and this issue into the long grass.
As we approach the latest round of announcements on bankers’ bonuses and the public face the biggest cuts in a generation there is no doubt that the temperature will rise. The public have a very real sense of fairness and as they watch their local library close they will feel a deep anger about the bankers who got us into this mess reaping large returns. Businesses and banks are a part of our society, they are our economy, yet they depend on public trust and good will.
When the people who run them become so dislocated from the society they sit within, or the workers who work for them, because of the level of remuneration, they will struggle to understand the very people they depend on. A business as usual attitude for the banks is the wrong move to make; the public simply won’t accept it.
Even the bankers seem to recognise this, as yesterday they held discussions with the British Bankers Association on reducing the size of their bonus pools from £7billion to £4billion. The outcome of these talks is yet to be seen and perhaps they will result in some action but it is clear they simply won’t be enough.
A short term decision on bonuses this year misses the point that what is needed is a systematic exploration of how pay was linked to short term risk taking that is in turn linked to the financial crisis. Without this, any action will fail at the first hurdle.
Pay is a complicated issue, whether it is bankers, CEOs, footballers, or X Factor stars there are issues relating to the effect that these high paid individuals have on their industries, the economy and society. The High Pay Commission will be exploring this in depth – if you want to find out more visit www.highpaycommission.co.uk or follow us on twitter @highpaycom.Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.