Apologies for the title, for the more sensitively minded amongst you.
This morning, however, from the Guardian, we get two articles on high executive pay and how public trust in the private sector is being corroded. The first runs as follows:
Warning high pay is “corrosive” to the UK economy, the High Pay Commission calls for greater transparency in the setting of executive pay and says employees should sit on remuneration committees. Its recommendations come in the most comprehensive report yet on the need for action on top salaries.
The report shows executive pay has risen sharply – the pay of the head of Barclays is up nearly 5,000% in 30 years – while average wages have increased just threefold.
The commission was set up by the leftwing pressure group Compass and backed by money from Joseph Rowntree Charitable Trust. A government source said on Monday, however, that the work was being taken seriously.
The boss of one of the UK’s most valuable public companies has admitted the country is losing trust in British businesses after a new independent report on “stratospheric” executive pay.
Andrew Witty, the chief executive of pharmaceuticals firm GlaxoSmithKline, said: “Trust in business has clearly eroded and needs to be reconstructed. It’s very dangerous if a country doesn’t trust the private sector.”
And then goes on to underline that:
The comments were made to the High Pay Commission, a body set up by the left-leaning thinktank Compass and the Joseph Rowntree Charitable Trust to probe executive rewards, and are quoted in the final report of its year-long inquiry, which lists 12 recommendations aimed at curbing rocketing executive rewards.
The study, published today, adds that the public believes “senior company executives are ‘rigging’ the system for their own ends”, and that “excessive high pay damages companies, is bad for our economy and has negative impacts on society as a whole … This distortion creates an impression that business leaders are ‘in it for themselves’ and is damaging trust in British companies, especially at a time when most workers are seeing little or no increase in their pay”.
But it’s not only boardroom pay which is rocketing. There’s the barely ever commented case of supermarket chains whose profits are multiplying even as people have less money to spend (and still they claim inflation is being kept in check by the supermarkets’ probity – well, I’m sorry: I really don’t see it in my weekly spend). So is this a case of Giffen goods perhaps? Or something rather more unpleasant? As Europeans for Financial Reform point out:
The sharp increase in the prices of food and agricultural commodities, as well as of oil, in 2007 and 2008, raised many concerns. The high price of basic food commodities contributed to social unrest and an increase in global hunger, undermining development and people’s right to food as defined in the Universal declaration of Human Rights. The IMF price index of internationally traded food commodities increased 130% from January 2002 to June 2008, and 56% from January 2007 to June 2008. This period of exceptionally steep price increases ended at the time the financial crisis intensified, mid 2008, with food commodity and oil prices showing a sharp decrease. However, late 2009, the Food and Agriculture Organisation (FAO) issued a new warning about rising food prices.
As the press release goes on to point out:
[...] The two fundamentals that traditionally constituted agricultural commodity prices are roughly described as (1) demand side factors (e.g. more people needing food, income growth, and increased demands for bio-fuel) and (2) supply side factors (e.g. yield growth or bad harvests, the prices of inputs, and availability of food reserves).
Manipulation of these fundamentals, e.g. by keeping commodities away from the market (hoarding), causing shortage that results in price increases, is the kind of speculation or price management that might still play a role in today’s commodity markets.
So whether this is intentional or not, those who already have plenty – at least in the UK, that is – would appear to be on the point of benefiting from the wider crisis on both a personal take-home pay basis as well as at a more general corporate level.
That is to say, the ratios relating to relative standards of living between workers at the bottom and executives at the top may not only have increased through the stratospheric remuneration of the latter but also – via the actions of those whose responsibility it is to marshal commodities – through the manipulated market behaviours of those who buy, sell and hoard.
For if you thought it was bad enough that people might speculate with your money, how very much worse would it be if they chose to speculate with your food?