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Limitation on Maximum Salary Packages for Chief Executives etc

Comment 13th July 2010

To limit the total net salary package of any CEO, MD, local authority chief etc and of all highly paid non-chief executives to a maximum of 10x the net pay (ie pay net of tax) of the lowest-paid worker in that same organization, OR to a net maximum of £200,000, whichever is the lesser.

A ban, complete, on the "bonus culture".

Why does this matter?

In recent decades and particularly since 1997, the pay of the highest-remunerated officials, directors etc has rocketed, following the American example. In the USA in the 1950's, the typical private sector CEO was paid about 15-20x the pay (gross) of the lowest paid in the same company. Now the ratio is hundreds or even thousands of times that lowest-paid worker's pay. The same path has been followed in the UK and is a disgrace to society.

It is often objected that the highly paid "deserve" to be paid hundreds of times the remuneration of their base=level workforce, but in fact there is often no justification for this. The head of major banks (eg Barclays) are sometimes paid literally hundreds of millions of pounds per year, despite the fact that banking is, in essence, a simple business and rather routine in fact. The cashier in a bank branch may earn less (gross, even) than £20,000. So in this instance the CEO is getting perhaps 10,000 times the cashier's salary. This cannot be just or right.

Likewise, we now hear that a head teacher in one primary school is paid a base salary of about £180,000, in itself probably two or three times what is justified; however, with bonuses etc, he is receiving (before tax) nearly £300,000, which is ridiculous when the teachers in his own school probably get no more than £30,000; a ratio of 10x. Many heads and chiefs etc receive 20x, 50x, 100x the pay of their own workers.

Another curse is that of the bonus culture. There is no justification for it at all. The assessment of "performance", especially in a non-profit organization is inevitably arbitary or plain silly (how many boxes are ticked etc). People should get paid salaries. If they perform well overall, then that salary is more the next year. etc.

There is no reason for anyone in the UK (except, arguably the very few like Dyson or Branson who are GENUINE entrepreneurs) to receive, after tax, more than £200,000.

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