Snouts still in the trough — and now bosses want 20 per cent of every profit

I like to think I helped start the national debate about fairness and executive pay with an article here in May 1993 headlined ‘Snouts in the Trough’, illustrated by Garland with pin-striped porkers helping themselves to huge portions of gravy. Since then, bosses’ pay packets have ballooned — the heat in 1993 was caused by £140,000 salaries for water company chairmen, whereas this year more than 4,000 City bankers are set to receive million-plus bonuses, and one, Driss Ben-Brahim of Goldman Sachs, is said to be collecting (presumably in an armoured truck) £50 million. But the arguments against fat-cattery remain stuck in early 1980s leftist rhetoric: the TUC’s Brendan Barber admits it’s wrong to resent ‘proper rewards for hard work or risk-taking’, but points out that the Goldman bonus pool alone would be enough to give every British worker £350; Peter Wilby in the Guardian keeps it simple by calling for ‘a return to the politics of envy’.

Well, envy is a deadly sin, and equalising downwards has long been recognised as economic folly. But some of the principles involved remain just as I stated them in 1993. Entrepreneurs who found and run successful businesses are fully entitled to their fortunes. Chief executives who revive ailing companies, generating large gains for shareholders as they do so, also often deserve to become what Wilby calls ‘filthy rich’. Functionaries who merely exercise a steady hand on the corporate tiller deserve less lavish rewards, but can expect the ‘market’ rate for public-company directors, which has nothing to do with market rates for doctors, teachers or shopfloor workers.

As for Mr Ben-Brahim and his ilk, they are not bosses but middle managers, and their bonuses represent about a fifth of the profits of their specialist trading activities, leaving four fifths for the owners of the capital deployed — a similar proportion to the fees creamed off by managers of hedge funds and private-equity firms.