Executive bonus payments need to be reined in

It is not so long ago that the British looked on aghast at the enormous bonuses paid to executives as the economy went into an economic nose dive. 

For the millions of our fellow citizens, there was austerity, falling wages and a collapse in house prices.

For the millionaires, it had been party time.

It is well known that Mr Cameron had said that we would all be "in it together". But that is not how it is turning out.

The 2008 crisis and its aftermath ought to have ushered in a new social contract in our country – one of shared sacrifice during the tough times, followed by a more just distribution of growth when prosperity returns.

But now it seems that bonus payments have returned to pre-crisis levels. This is a slap in the face to the millions of workers for whom the 2008 crisis marked the beginning of a decade of lost pay.

Bonuses may have returned to the heady days of early 2008, but our economy hasn’t. Growth remains anaemic, private investment is well below the OECD average – at 13.7% of GDP compared to 17.6% across the OECD – and the rate of productivity growth is sinking. 

Most notably, though, millions of workers have seen their pay stagnate over the last ten years. Only Greece has seen a sharper fall in wages. Britain is already one of the most unequal countries in the developed world. The current news about escalating bonuses at the top only emphasises the problem.

Ongoing deep-seated and structural weaknesses in Britain’s economy give the lie to the claim that large bonuses are a reward for performance. On the contrary, large bonus payments were at the centre of a culture of greed, short-sighted decision-making and risk-taking that helped to cause a financial crisis in 2008.

It is sometimes claimed that bonuses are necessary to attract talent and incentivise hard work by company executives.

Tell that to the millions of nurses, teachers, and social care workers – people who make an immeasurable contribution to our society - who are now in their 6th year of a public sector pay freeze. Apparently, unlike the chief execs, people on middle and lower incomes are best incentivised to work hard by lower pay and longer hours.

All of this was captured in a single image only a few days ago. We saw a photo of the owner of Sports Direct vulgarly brandishing a wad of £50 notes whilst entering a place of work where its employees are struggling to get by.

"Loadsa money" executives alongside millions whose incomes are declining will not work any longer. Labour will ensure a fairer remuneration system where wages and salaries are better distributed and hard work and long term success are properly rewarded.

We will start with legislating to put workers onto the remuneration committees of company boards. If you cannot look your employees in the eyes because their incomes are declining whilst your own bonuses are on rocket boosters, then you ought not to be making the decisions you are.

 

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