Time to break the fat cats’ cartel

A few months ago I appeared on a panel organised by a leading firm of pay consultants, Hewitt New Bridge. The audience, in the City, was packed with ‘human resources’ directors, pay experts and members of ‘remuneration committees’ — the directors who set pay in leading public companies — among whom there was broad acceptance that the current ‘Great Recession’ might require some kind of temporary pay restraint.

But when I suggested that remuneration committees were lazy, easily bullied by powerful chief executives (such as former Royal Bank of Scotland boss Sir Fred Goodwin) and too often cosy cartels where directors engaged in mutual back-scratching, the room erupted. The culture of large annual boardroom pay-and-bonus boosts has become so entrenched that members of the high-pay oligopoly simply don’t get it.

Instead of acting as protectors of shareholders’ interests, pay panels have become captives of the managers and slaves to globalisation. In much the same way that Britain imported subprime mortgages, securitisation and exotic debt instruments from Wall Street, so remuneration committees have adopted destabilising policies from across the Atlantic.