The Billion-Dollar Bonus

We Need a Global Maximum Wage

By George Monbiot. Published in the Guardian 18th May 2000

Listening to the cries of protest following Tony Blair’s speech to the CBI on Tuesday, you could be forgiven for believing that Britain’s chief executives are doing everything they can to hold down interest rates and reduce the strength of the pound. But when you look at what they pay themselves, it’s not hard to see that they want to have their cake and eat it. Sterling’s strength results, in part, from the actions of the people who complain about it most.

The wage restraint Britain’s bosses call for applies to everyone but themselves. Surveys released last year showed that executive pay had risen by 26 per cent, or ten times the rate of inflation. The biggest packages smashed all the records. Jan Leschly, the head of SmithKline Beecham – a company which depends on its export earnings – made a personal contribution to inflation of no less than £93 million.

It’s likely to become far worse. Both business and government are calling for “world class salaries” for the heads of “world class companies”. What this means in practice is American rates of executive pay. Last year, Disney’s Michael Eisner made $575 million, or $250,000 per hour. Consultants are already predicting an era of billion-dollar bonuses.

The executives claim that they are paid no more than they have earned, but in truth they have simply manoeuvred themselves into positions in which they can extract fantastic rewards, even when they are sacked for poor performance. Last week the chief executive of New Look received £600,000 plus share options for touching a woman’s bottom: nice work if you can get it. In the United States, golden goodbyes have given way to “platinum parachutes”: dismissal payments of $100 million or more.

The government insists that executive pay should now be linked to performance, and everyone – the unions included – appears to agree. But this is no more likely to lead to either reduced inflationary pressures or enhanced social justice than payments which bear no relationship to corporate prosperity. For a company’s performance now has less to do with success in the marketplace than with the policy environment in which it operates.

When banks are allowed to shut their smaller branches, for example, or when train companies limit their costs by refusing to install safer systems, their “perfomance” rises, and directors’ bonuses will increase accordingly. Much of the corporate growth in recent years is the direct result of a political programme which company lobbyists have helped to engineer. Deregulation has allowed them to shed some of the costs – of protecting the workforce or controlling pollution, for example – which they would otherwise have had to carry. Privatisation has enabled them to seize parts of the economy which formerly lay in the hands of the state. Globalisation, by “harmonising” regulatory standards all over the world, has allowed the biggest companies to achieve new economies of scale, enabling them to seize markets from smaller firms.

Corporate perfomance, in other words, improves in inverse proportion to public life. Rewarding directors for boosting it means allowing them to grab not only the wealth generated by their
workforce, but also the intangible assets which belong to us all. Indeed, their rising wages represent in themselves a further expropriation of public property, as they seize the inflationary commons from the rest of us.

We need, in other words, a far more radical approach. Ten years ago, it was hard to believe that big business would ever allow a minimum wage to be imposed in Britain, but the political pressure became irresistable. Today the idea of a maximum wage seems just as implausible, but it is just as achievable. Directors would be allowed to earn no more than a certain multiple – eight or ten perhaps – of the wages of the lowest paid member of their workforce, including subcontractors. If they wanted more money, they would have to give everyone more. Like the present system, it would be inflationary. Unlike the present system, it would be just.

Business leaders say that if such a policy were imposed, they would take their business elsewhere. This is why it would need to be a global measure, enforced wherever companies chose to trade. Happily, by insisting on the globalisation of almost everything else, they have made it easy for us: with sufficient political will a maximum wage could be forced into the next world trade agreement.

How much more of the world’s economy does a tiny handful of men and women have to seize, before we understand that they have stolen their wealth from the rest of us?