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The customer is always right: how to reduce executive rewards with procurement contracts

Government could use its power as a purchaser of outsourced services to demand executive pay restraint

The size of the 'outsourcing market' for public services contracted by the state and delivered by private companies is now worth more than £80 billion.

The top executives of firms such as Atos, G4S, Serco and Capita receive multi-million pound pay packages common to the private sector. Yet these firms depend on public money for a huge proportion of their revenue.

This report argues that because major outsourcing companies' rely on public funding and have a remit to deliver vital public services, it is inappropriate for their executives to be lavished with the kind of payouts common to other large private corporations. As a customer, Government can employ additional leverage over outsourcing companies to set an example in terms of economically and social responsible pay practices. 

The report notes that European Union rules on Government contracting specifically permit clauses designed to ensure the optimum benefit to wider society from contract awards. Governments are not simply compelled to seek best value in terms of the immediate financial cost to the public finances. As such, conditions of procurement contracts could include:

As these conditions represent a form of consumer activism rather than Government regulation, they have an additional advantage of creating downward pressure on pay in a way that could appeal to voters of different political persuasions.

Download report

Posted on 9 May 2014

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