Voters will not stand for these huge payouts
What exactly does Lord Mandelson think about the pay of Bart Becht, the chief executive of Reckitt Benckiser, who took home benefits worth a little over £90 million last year? I
n the good old days of new Labour, the business secretary famously pronounced the party “intensely relaxed about people getting filthy rich” (though the second half of the quote — “as long as they pay their taxes” — is often forgotten).
A decade or so on, however, Lord Mandelson seems a little more uptight about boardroom largesse, laying into Barclays Bank's Bob Diamond at the weekend for his earnings.
Let's say this about Mr Becht's pay packet: it is clearly not the sort of reward for short-termism that critics of the banks rightly get so vexed about. Mr Becht has served the company for more than 20 years — the last 12 of them as its chief executive — and some of the options he cashed in during 2009 were first awarded back in 2001.
Take a look at Reckitt's performance over that period and on even the toughest of tests it is quite clear that Mr Becht has lead a company during a period when |billions of pounds worth of shareholder value has been created.
Still, £90m? It's probably not possible to quantify exactly at what level a pay packet begins to fall into the category where most people would instinctively regard it as egregious, but there will not be too many folk who argue that Mr Becht's remuneration falls on the right side of the line.
The tide has turned on boardroom pay. When even the head of the CBI, the group that represents Britain's biggest businesses, speaks out against soaring levels of executive remuneration, one knows that a backlash has begun.
Richard Lambert last week warned that business leaders would come to be seen as “aliens” if they did not address public perceptions of their rewards, pointing out that the typical chief executive now earns 81 times the average wage, up from 47 times a decade ago.
Reckitt could not — or would not — tell us yesterday how Mr Becht's rewards last year compared to the average earnings of its 23,000-strong workforce, though it did say they got a pay rise of four per cent. The ratio between the two figures must, though, have been whacking.
Should there be caps on executive pay? Well, in the current political environment, where there is essentially a consensus between the main parties on the desirability of laissez-faire capitalism, it is hard to imagine a mainstream politician pushing for such legislation.
Yet doing so might be hugely popular. When left-wing think tank Compass last year called for an investigation of executive pay, it asked pollsters YouGov to gauge public support for new laws to combat |income equality — it found four in five people supported such measures.
Nor would a limit on the ratio between boardroom and shop floor rewards necessarily attract support from only the left. Who once suggested that the boss of a company should earn no more than 20 times as much as the lowliest member of staff? Step forward John Pierpoint Morgan, founder of the US investment bank JP Morgan.
In practice, there would be all sorts of difficulties associated with such practices and there may be easier ways to tackle high pay. One, for example, is to demand that high earners make a larger contribution to the income tax take — the Chancellor, Alistair Darling, has taken a step down this route with the new 50% top rate on pay of £150,000 or more.
Still, businesses just cannot go on sanctioning payments of this size and expect people simply to shrug their shoulders. And if business leaders want to play a role in public life, as so many of them now seem to, they can't continue, as Mr Lambert put it last week, behaving in a way that risks seeing them viewed as living in “a different galaxy from the rest of the community”.
As this election campaign begins, the Conservatives are cockahoop at the support they have won from business leaders for their plan to reverse the Government's proposed rise in National Insurance next April. Labour is aghast in equal measure.
But it just may be that those feelings are misplaced. In a world where company bosses typically earn more than 80 times as much as their staff and individual executives are taking home £90m in a single year, are voters in any mood to listen to their opinions?