The Politics Thread

[Bijou Bob]

Is this for an assignment Pru??

I presume a case could be made that if one type of work was primarily done by workers of a particular gender, then the policy could be said to be discriminatory?

[Worthy4England]

What are the economic arguments against laws saying that no-one in an organisation can be paid more than a set proportion of the average wage of the organisation (say 20x average wage - a figure plucked from the top of my head for the sake of argument) and no-one can be paid less than another proportion (say 1/2 of average wage)? The theory being to keep plenty variation to give incentives for people to work their way to the top, but you combat the gaping inequality between the executive end and the rest while also giving the bosses a stake in raising everyone's pay.

The only two I can think of off the top of my head are:

-a theoretical brain drain abroad;
-that certain sectors (say manufacturing) would lose out on the best management/ executives because they wouldn't be able to compete with others (law/finance) because their "average" is going to be skewed towards lots of lowly paid manual workers vs better paid "professionals".

Any more?

Value creation on behalf of the Company - linkage to Shareholder value, which is your last point (broadly)....I don't think it only applies to law/finance whatsoever - lots of managers have professional qualifications, MBA's yadda, yadda. In FTSE Top 250 most Board level folks have some sort of Professional Qualification...

Let's be honest here, no one is going to suggest that the value created by a till operator, represents the same level of value to the shareholders as the MD (albeit the MD could be an incompetent fcukwit)

[Prufrock]

BB - 'fraid not, I'm just that kind of an exciting guy !

Worthy, I'm not suggesting the MD doesn't add more value, and I'm not suggesting we pay everyone the same, I'm just wondering if it wouldn't be better to have some sort of proportionate link. (And law/finance were just examples - general point being the more "professional" sectors will have higher average wages and so will be able to get the best execs coz they'll be able to pay 20x a greater sum).

Executive pay in the 90s was around 60 times that of the average worker (it's not clear if that means nationally - which would be a shit comparison - or the average worker in their business). Was everyone climbing the walls fearing for the state of the economy because we just couldn't pay the executives enough proportionally to the rest of the workforce? Now it's 180 times the average. Are businesses far stronger because of that?

I'm not suggesting we pay everyone the same but it seems at least in theory a good idea to link average wages in a company to executive pay so there's an incentive a) for a successful company to bring all its staff with it and b) to still make more money generally (the more money you make the more you can pay your workers on average meaning the more you can pay yourself).

If that is a good idea (which I'm not taking for granted but it sounds nice) then there's clearly a sweet spot where upward pressure on wages is maximised for minimum damage to the business. Clearly a 1:1 ratio would be some kind of Soviet nonsense, and 1:1,000,000 would be pointless.

[Prufrock]

Anyway, I reckon I've cracked why it's bollocks. It's not different sectors it necessarily makes less attractive, but bigger organisations.

If I have 50 employees then I need to increase profits by £70k to pay each of them £1k per year extra so I can pay myself £20k extra.

If I have 1,000 employees then I need to increase profits by £1,000020 so I can pay each of them £1k per year extra so I can pay myself £20k extra.

Good luck finding someone to take the second job!

[Worthy4England]

Lots of Exec Pay, isn't a flat salary though. There's a difference between salary and remuneration. Many Exec Pay packages at their base level are within a reasonable (sorta/kinda) differential to an average. Then you add indirect remuneration - bonus for specific achievements, company shares etc. and the picture can be very different. As these elements are related generally to KPI's that others don't have, would you exclude them or include them.

I can recall when I was a whippersnapper being asked to take a 10% cut as everyone else was being asked to, and the CEO had take 20%. I told 'em to fcuk right off. Glad I did in the long term, when it was revealed that his 20% only related to his base salary and he'd more than made up for his cut on base, by increased bonus for achieving a cost savings target.

Oh and whilst we're about it, you'd need to throw in the length of the average working week that an exec puts in vs someone who works 37 hrs per week.

Understand why people think this is a good idea - don't see it working in practice.

[Prufrock]

I think it would have to include all the bonuses and stuff to be effective.

I understand what you're saying on the rest of it, but in the 90s CEO's were paid far less compared to their average worker than they are now. Was everyone wringing their hands about how badly done to CEOs were when paid only 60x their average worker? Or were there great fears that businesses would collapse in that socialist utopia?

I'm not saying they shouldn't be paid more, I'm just saying they shouldn't be paid THAT much more.

[Lord Kangana]

Let's be honest here, no one is going to suggest that the value created by a till operator, represents the same level of value to the shareholders as the MD (albeit the MD could be an incompetent fcukwit)

I'm intrigued by this notion.

Lets take the bins, as a for example. That which their MD does is, to be frank with you, of toss all importance to anyone. We need the bins to be emptied in order for our large urban areas to function. The same goes for sewerage and umpteen other absolutely essential amenities.

That we've created a system that values the valueless is f*ckwittery of the first water. In other words, shareholder value shouldn't be considered more important than the laws we create to have the society we desire, or in this for instance, need.

And it would appear I can't type the word f*ckwittery. Shame.

[Worthy4England]

Let's be honest here, no one is going to suggest that the value created by a till operator, represents the same level of value to the shareholders as the MD (albeit the MD could be an incompetent fcukwit)

I'm intrigued by this notion.

Lets take the bins, as a for example. That which their MD does is, to be frank with you, of toss all importance to anyone. We need the bins to be emptied in order for our large urban areas to function. The same goes for sewerage and umpteen other absolutely essential amenities.

That we've created a system that values the valueless is f*ckwittery of the first water. In other words, shareholder value shouldn't be considered more important than the laws we create to have the society we desire, or in this for instance, need.

And it would appear I can't type the word f*ckwittery. Shame.

It was a generalization but happy to take the point in principle.

The MD of bins - if there is an MD of bins, generally has no shareholders in the context of what you're arguing. Where we're looking at a privatized service then the same would apply.

Even in the context of the public sector service the MD will still be responsible for the P&L that they're given to operate within, ensuring they get best value from that P&L, whilst completing the job for said large urban area in a manner that meets the overall H&S obligations. I reject your notion that they're comparable activities.

You'd clearly not want someone running the Service without significant industry knowledge or a member of the Chartered Institute of Waste Management.

I reject your notion Sir, that the value the MD brings is comparable.

How are you measuring valueless just for my understanding?

I think the system we've created, is a different point than Pru's talking about, which seems to be "given that we have system X - should it be that someone can earn Y above the average"...Reality is the system of trading that we currently have isn't going to change any time soon in my opinion, so shareholder value in the private sector will still be a significant factor. The fact that a fairly straight forwards Google search seems to return a whole list of values for the differential up to 354 x from what I can see on P1, would lead me to want to understand whether the calculations were remotely comparable between now and now, and then and now...

[Worthy4England]

Just as an aside, my CEO earns 84x what I do...

[Worthy4England]

I think it would have to include all the bonuses and stuff to be effective.

I understand what you're saying on the rest of it, but in the 90s CEO's were paid far less compared to their average worker than they are now. Was everyone wringing their hands about how badly done to CEOs were when paid only 60x their average worker? Or were there great fears that businesses would collapse in that socialist utopia?

I'm not saying they shouldn't be paid more, I'm just saying they shouldn't be paid THAT much more.

So, lets look at this a little deeper. In 1990 the company I work for had a turnover around 20% of what it is now and a workforce about a third of what it is now. I am earning 10x what I did in 1990. The CEO's salary has increased about 10x over a similar period - probably slightly higher than that - I can find 1995 but not much before then. Broadly, me and the CEO are in line comparatively. That belies the fact that in 1990 I was a bin collector and now I'm not so I've progressed forwards (whereas a CEO is still a CEO).

During that period of growth, the CEO has had to oversee significant M&A activity, which has increased apace since the 1990's for successful companies with globalization, are now getting more and more personal liability possibilities than previously were possible - mainly as a result of Enron, Anti-Corruption Legislation etc, etc, things such as that, that wouldn't apply in general directly to shop-floor workers or even "average" workers. You still have to balance reward against the average working week. Most CEO's I know (and no I'm not one!) work huge hours - they couldn't get away with 9-5 - There's a significant impact on the amount of commitment it takes to be a CEO vs someone working set hours or set shifts etc.

Lots of factors affect this equation, I don't think it's anywhere near as simple as "Oh look the relativity has changed - that can't be right"...

[bobo the clown]

Just as an aside, my CEO earns 84x what I do...

... & quite fckg rightly.

[Prufrock]

I think you're on dodgy ground if you're arguing CEO pay (or any pay) is or should be determined by some kind of "deserving" yardstick! That's a bit teenage Commie .

Seriously though, I'm sure they do do very long hours and very complicated work, but that's why they tend to get paid lots more anyway (if pay was capped at 20x they'd still be paid far better than the shop-floor worker). Does your CEO do 84x the hours you do? Is his work 84x harder? I'd be shocked if it was. And in any case, that's not how pay is determined.

It's not even determined by "value" added because there's no real way of working that out. It's simply set by a market in terms of "what you can get". The problem with that is that markets are inanimate and unfeeling and currently there's no organised labour to drive workers wages up, but there's a cult of the CEO that sees their pay spiral and spiral in the belief that they have a magic touch. Quite often free markets resemble jungles.

I think free-marketism has become just as unfeeling an ideology as communism was and it's now dogma that markets always know. I also think there's a huge void left for a politcal party that a)recognises that market forces can be a brilliant tool instead of drawing lazy anti-business conclusions but also b)recognises that markets have sharp egdes (and don't always apply) and tries to legislate to mitigate that. Let's not labour under the illusion that any markets (bar Silk Road, say) are truly free. There are always some limits.

Pegging CEO pay still leaves all the market forces in place that incentivise businesses to maximise profitability, but at the same time makes sure that when they are successful they are forced to take their workers with them.

[Worthy4England]

I disagree that it's not worked out be value added (whether it's the correct value or not is a different matter). Most CEO packages have a direct correlation to market driven performance indicators. Our current CEO gets around 10% of remuneration as salary, 25% as cash bonus and the remainder in stock.

65% is directly linked to the company stock performance, 25% cash bonus to direct performace criteria and only 10% to "turning up for work" remuneration. I guess you'd need to apply a similar split to average to make it all equitable. Fancy tying 90% of your pay to Company performance and getting 65% of it in stock?

[Prufrock]

Sounds fine if it's worth 84x what Two Jags Worthy takes home .

I mean it's not worked out at comparative value added, sorry. So the fact the CEO is paid 84x what you are isn't worked on on the basis that he a) works 84x as hard as you (what he "deserves" in the first paragraph) or b) because he adds 84x the value you do (what "value" he adds in the second).

So yes, it's an attempt to gauge what he's worth, but to gauge it using rates set by markets. His remuneration is set by what he can get relative to other comparable offers and what the shareholders can pay him relative to other candidates.

I've no problem with markets setting pay; any other system seems doomed to failure - most people might agree a doctor "deserves" more than a road-sweeper, but how do you decide how much more? And does a road-sweeper get more or less than a bin man? - so yes, markets need to be involved, but I don't buy that then means you leave the markets to do whatever they do. Pegging pay to average earnings still leaves all the usual market forces in place but means that when a sector or business does well, everyone benefits.

I'm by no means wedded to the 20x multiplier mind. There's clearly a figure between 1:1 (which would be pointless, who be a CEO with all those extra hours) and 1:1m (which would defeat the purpose) at which the upward pressure on wages is maximised for the minimum damage to incentives.

What disastrous thing are we saying would happen if they were pegged other than CEOs would be paid a lot less than they are now (though still a lot more than the average worker)? This was the case 10 years ago (in that they were paid less rather than they had to be paid less) and everything wasn't on fire.

[Worthy4England]

I'm not convinced that there's widespread acceptance of the random stats relating to the comparison with 10 years ago - or even that they'd be measured in the same way. That's point 1.

I find your comments that our CEO might be a "he" offensive in the extreme, given your previous standpoint on females in the Boardroom.

There are clearly problems with a simplistic average, not least of which is the pyramid that forms large companies. Company A could have a very flat management structure and therefore would be unduly impacted by an average vs a company that was overloaded with middle management - it's not really a good measure either, other than it provides some dinner table conversation at an Accountants' Convention.

What would make anyone's decision on this better than the market, other than to set an arbitrary % cap, which I reckon would be almost impossible to get consistency with across business types and different Company structures?

What's the motivation for so doing, other than a "notion" than the worlds' not fair. We know it's not fair from the minute you're delivered into it! You want the rewards - become you're own CEO, set up your own business and see how easy it is. That opportunity exists for all bin men and selected others...

And oh fcuk we're 3 down.

Oh and whilst we're about it does the average include the huge offshore workforce or exclude it?

[Bijou Bob]

I'm struggling to understand the huge fuss being made over a small number of British pilots bombing ISIS whilst flying American aircraft. Mountain out of an incredibly small molehill.

[Lord Kangana]

I thought Parliament had voted no on the issue?

[bobo the clown]

#2 son sent me this tonight


YouGov:
First preference votes amongst Labour members/supporters
11%: Kendall
20%: Cooper
26% Burnham
43%: Corbyn

with an analysis of 2nd preference votes eventually showing Corbyn winning 53/47 against Burnham.

Now, after YouGov's performance in the General Election they must be seen with great caution, and of course there's time yet. But every time Burnham comes on TV or radio at the moment damages him and he's looking like a rabbit in headlights right now.

[Prufrock]

I'm hoping there's a "silent Tory" equivalent for "silent, non-mental, non-self-indulgent Labour" voters.

[thebish]

I'm hoping there's a "silent Tory" equivalent for "silent, non-mental, non-self-indulgent Labour" voters.

none of those four inspires me. At least Corbyn gives straight answers to questions... I have heard the other three interviewed over the last week - and NONE of them gave a single straight answer...

they would all be electoral disasters... given that - I'd much rather a disaster who believes what he's saying.