Saturday 7 January 2012

Putting the boot in on executive pay.

It is good news that Nick Clegg is going to use his deputy-priministerial status to "do something" about the excesses of executive pay, and the signs are that David Cameron is, at least vaguely, "on side" on the issue. Unfortunately the most likely option is to put an employee representative, or maybe representatives, on remuneration boards. This sounds more like an unprotected little toe rather than a steel-toecapped boot.

Certainly one employee representative will not be enough. Two would be better, but even they would need substantial back-up to produce arguments based on research and evidence in addition to moral indignation.

Economic historians tell us that the "invention" of the Joint Stock Company with limited liability was as important to the development of the Industrial Revolution as the technological inventions, since it enabled investors to put money into companies without putting their entire fortunes at risk.

When I first campaigned as a Liberal in the 1960s we argued that the existing Joint Stock Company was no longer "fit for purpose" and we proposed lots of ingenious plans to ensure that company boards should have equal representatives of shareholders, employees and the community. No one interest should have an automatic majority, so companies would be forced towards decisions that were in the interest of all concerned, rather than just the shareholders.

That still seems a good idea, and I suggest that Liberal Democrats in government should search the party archives and dust down these splendid ideas. If it is felt that things have moved on in the last half century than, rather than a feeble couple of "worker representative" I'd like to see Nick Clegg use his deput-priminister's department, in conjunction with Vince Cable's Department for Business, to produce proposals for a major revision of company law which will ensure that the interests of all relvant influences are taken into account when companies make decisions.

It is not just remuneration boards which need reforming, but the entire way our capitalist sector is organised. Liberal Democrats have made great sacrifices by going into government. We might at least try to ensure that something substantial comes out of the pot, and not just sticking-plaster remedies.

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