Thursday, April 24, 2014

Why Vince Cable is Wrong About the Impact of Excessive Pay

Vince Cable warns firms on the dangers of “excessive executive pay”  by highlighting the dangers to their firms of a “loss of public trust” but it seems they and, more importantly, we don’t actually care enough for that threat to hold water. Until we do nothing will change, but what if anything will spark that revolution?

I like Vince Cable. I find myself more in agreement with him than disagreement but his recent pronouncement about the dangers presented by “lost public trust” through excessive pay settlements at large corporates - notably Banks - will fall on deaf ears. The truth of that is entirely apparent. If Banks, for example,  really did believe a loss of trust was in any way a threat to them they would have acted long ago to actually enact meaningful change to address it. Trust was destroyed in Banks and financial institutions a number of years ago when their giant ponzi scheme and unfettered hubris caused the meltdown in a financial farce that we have all suffered the consequences of. I see no evidence that trust has recovered in any shape or form since.

But we didn't act back then. The opportunity to truly make a change was then and despite the activities of the Occupy movement, some street protest and and much vitriolic comment our actual appetite to suffer the inconvenience of bank failure, loss of savings, and a more radical form of unrest coupled with a monumental lack of vision, courage and leadership from the left meant that the chance to bring about radical change was missed. The threat of a loss of trust to banks passed. There is, and never has been, such a thing as “too big to fail”, its just a matter of your stomach for the consequences and challenges of surviving that failure. Of course politicians have little appetite for it and, so it seems, neither do we anymore.

Since then we have seen a prolonged attritional period in which the more lowly bank staff, along with many others, have lost their jobs in order to reinstate the system that produced the problem in the first place. This year bonuses on Wall Street are reaching pre crash proportions, Barclays are awarding themselves huge bonuses despite a massively under par performance despite being called (accurately) “Greedy Bastards” by one investor at their last AGM and the tokenistic vote by Standard Life to not support the bonus award this year. The parting on the left has indeed become a parting on the right

And why do we not act? Why do we not desert banks? Why do we continue to buy the products and services from firms with ghastly levels of inequality in their pay structures between the self serving and mutually self justifying stratospheric pay club of these serialy failing top executives hoping from one corporation to another, and the shop floor?

Well in part we are lazy and unwilling to be as courageous as Samson and push the pillars aside and brave the falling masonry.

Another reason is a our willingness to embrace debt. Debt makes us slaves which is why the institutions, banks - and particularly the Governments love us to take it on. Debt encumbered wages slaves are much more passive and far less troublesome. Marx described religion as the opium of the poor. Well debt is the cudgel.

I am also of the view that many of us are disengaged from the reality of this inequality, thinking that these excesses exist a long way from us whereas in fact they are in organisation that we encounter and transact with every day. To that end I believe in total wage transparency at every employer so that everyone knows how the money gets spread around. At a stroke it would enable us to identify and address gender inequalities in pay, but also it would expose the monstrous them and us distribution in even mid sized firms and make us clamour for a fairer share.

There is also in many cases a lack of alternatives - but that may be changing.

I think Vince knows that his threat of “loss of public confidence” rings hollow as the rumbles of potential other legislation to tackle the situation.  It may be more of a threat to him than the business he aims it at,  

No the answer lies with us to act and until we do nothing will change

Being of a certain age I am perhaps more wedded to the notion of revolution than a modern western generation. And having grown up under the shadow of nuclear conflagration I have always embraced the possibility and prepared for the process of starting again in the ashes of a post apocalyptic world.

But maybe I am un reconstructed and perhaps the brighter future is less born in fire and more in triangulation. The empowerment of social and collaborative publishing and sharing technologies provide us with mechanisms to by-pass institutions by constructing alternatives, and it brings the possibility of greater transparency. And so it is that we see new digital currencies emerge, crowdfunding democratising investment and releasing new capital, and wikis transforming how we create and share information and I am proud to play my small part in using these tools for change and helping these ideas to develop.

If we can perhaps couple this change with the growing interest in circular economics and collaborative consumption models we can perhaps look to a less debt ridden, consumption dependant  future where the corporate monolith and bank dependency is reduced. Here we may not have to desert them we simply never engage with them.Then perhaps a loss of public trust might truly have an impact and focus minds. But, till then, I think Vince is wrong.