On Wednesday 3rd June the High Pay Centre celebrated its fifteen-year anniversary by holding an event at the House of Lords. The event featured a diverse, expert panel of individuals who have been involved with HPC during those fifteen years, generating great debate and discussion amongst those who attended. The panel included:
- Baroness Ruth Lister, Labour peer and Emeritus Professor of Social Policy at Loughborough University.
- Catherine Howarth, CEO of responsible investment NGO ShareAction.
- Baroness Natalie Bennett, Green party peer and a former leader of the party in Westminster.
- Lord Prem Sikka, Labour peer and Emeritus Professor of Accounting at the University of Sheffield and at the University of Essex
- Andrew Speke, Director of the High Pay Centre.
HPC Director, Andrew Speke, began by setting the scene, detailing the development of HPC following the final report of the High Pay Commission in 2011. At the time, the fallout from the 2008 financial and the implications it had on pay stagnation and public service cuts were just beginning to be felt. However, the rise in pay ratios from around 20:1 in the latter stages of the 20th century to over 100:1 in the 2010’s provided the impetus for a new think-tank focused on pay at the top of the income scale and the causes and consequences of economic inequality. HPC has evolved in the last fifteen years, becoming the trusted voice on top pay and how it interacts with wider business regulation, government policy and employment rights.
Natalie Bennett followed this introduction by starting from the premise of what society would look like if we adopted a model of low pay ratios between workers and their bosses? What would our own levels of pay look like, would we be more engaged at work and how would we relate differently to the people around us? She suggested that the question of fair pay can ultimately be reduced to the value an individual contributes to society. For example, who is more needed by society: bankers whose practices contributed to the financial crash, or sewage workers who carry out essential, often unpleasant work that most people would be unwilling to do themselves? On top of this, she noted that large ratios can be counterproductive for businesses, fostering unhealthy cultures of excessive ambition that undermine team dynamics and encourage corner cutting.
Catherine Howarth built on this discussion by highlighting the deeper power imbalances that currently exist within the economy between shareholders and workers. While automatic pension rollout has broadened share ownership, she argued it has not addressed the underlying asymmetry in voice, as most pension savers still lack the ability to influence the governance of firms. Ultimately, she suggested that the absence of rights for pension savers to express concerns over issues like excessive high pay in firms, unlike direct shareholders, means there is a lack of accountability within the chain, and such issues are likely to persist.
This fundamental point flowed naturally onto the arguments of Prem Sikka, who suggested a wide range of policy options that could address such power imbalances within the economy. In particular, he argued that the voluntary approach to corporate governance has failed to prevent irresponsible business practices or ensure the fair treatment of employees. Measures he proposed included a right for stakeholders to set an upper limit on executive pay, requiring the approval of 90% of shareholders for executive bonuses to ensure a genuine link between performance and reward, and granting employees a meaningful say over executive pay packages. These are the kinds of measures that HPC has long argued are necessary to challenge the dominance of the shareholder-centric corporate model, rebalancing inequalities in decision-making, voice and accountability.
Ultimately, the panel coalesced around a fundamental point: if left to its own devices, the market will only lead to damaging outcomes for workers, the environment and wider society. The speakers all agreed that the current model of exceptionally high pay comes at the expense of the broader workforce, undervaluing the workforces’ contributions and ensuring the persistence of low pay for staff. While the event laid bare the scale of the challenge of democratising the business environment and achieving a model of fair pay, it also struck an optimistic note by demonstrating that solutions do exist, and that there are a wide range of committed parties fighting for their introduction. With your support, this is exactly what the High Pay Centre will continue to do.