ANY OTHER BUSINESS| MARTIN VANDER WEYER
Boardroom pay is a rising problem
but this is the wrong time to tackle it
a no-deal Brexit, but so far that has made
no difference at all to the EU’s stance; at
two minutes to midnight and with recession
looming, maybe now it just might.To t h e s u m m it
Radio 4’s new adaption of Proust carried me
back not to fictional Balbec but to another
Belle Époque resort in the news: Biarritz.
I spent the summer of 1973 working there
as a clerk in the Barclays branch on Avenue
Édouard VII, next to the Windsor tearoom,
and lodging with the family of a rather
grand French doctor. My daily tasks includ-
ed counting huge bundles of pesetas smug-
gled over the border in shopping bags to be
exchanged for gold (then at $100 an ounce)
by Spaniards who feared a socialist revolu-
tion when the ailing General Franco died. It
was also my task to obtain funds from home
for British tourists who had blown their holi-
day money in the town’s casino.
I’m pleased to see the bank is still there,
though it’s no longer a Barclays, having been
sold in 2017 and rebranded ‘Milleis’. I’m
only sorry I wasn’t behind the counter this
week, because it’s all too easy to imagine our
Prime Minister, trouser pockets inside-out,
rushing in for cash to buy cocktails for fel-
low leaders (and Diet Coke for Trump) at
the Hôtel du Palais, the sublimely expensive
G7 venue around the corner. But having no
access to that gathering, I decided to host a
summit of my own and — in the spirit of our
new government — blast through previous
spending limits as I did so.
So to end my summer round of French
restaurant tips, I offer you the exquisite Châ-
teau de Mercuès, high above the river Lot
looking towards the city of Cahors. My lunch
companion and I ate perfect seafood risotto
with a Chenin de Mercuès Blanc Sec; we
negotiated what needed to be discussed and
afterwards strolled the hotel’s panoramic
terraces exchanging wisdom like statesmen.
OK, it cost us €60 each, but as Boris would
surely agree, sometimes you have to aim
high to win.T
he average FTSE 100 chief executive
earned £3.5 million last year — 117
times the £29,574 pay of the average
full-time UK worker, according to new fig-
ures from the Chartered Institute of Person-
nel and Development. Other sources tell us
that at the last count, 54 of those FTSE 100
chiefs were British, 21 held other EU pass-
ports, nine were Americans and 16 from the
rest of the world.
‘So what?’ I hear you ask. These are glob-
al companies competing in a global market
for management talent. Has not the average
FTSE 100 chief’s pay actually fallen from
£5.4 million since 2015, while UK wage rates
have been rising this year at their fastest
since the financial crisis? And aren’t we still
miles behind the US, where the comparable
S&P 500 top-dog makes $14.5 million (£11.8
million), at a multiple of 279 times average
US earnings, which are only fractionally
higher than ours? Maybe the problem of
what Theresa May called ‘abuses and excess
in the boardroom’, if it’s a real problem, is
going away of its own accord.
Or maybe not. UK figures were distort-
ed in recent years by the Ben Stokes-like
solo performance of former WPP boss Sir
Martin Sorrell, whose take-home peaked at
£70 million in 2015. But the bigger picture
is not distorted: it tells us the top-to-average
ratio has more than doubled over two dec-
ades in which the FTSE 100 index has stag-
nated, while no one has proved that higher
executive rewards lead to greater sharehold-
er value. The argument is always presented
the other way round: companies that won’t
pay the global going rate risk weaker perfor-
mance from second-rate managers.
Meanwhile, Mrs May’s legacy to the
business world she so clearly disliked is a
regulation that requires, from 2020, every
UK listed company with more than 250
employees to disclose the ratio of its chief
executive’s pay to the median pay of its UK
employees. No minister has ever suggest-
ed what that ratio ought to be: the domes-
tic stratum of FTSE 250 companies, where
the average chief earns £1.6 million, offers
a relatively modest benchmark of 54 times;
Jeremy Corbyn says that for government
contractors it should be no more than 20
times, roughly what it would have been in
a Soviet steelworks. If that line of analysis is
futile, the effect of publication will simply be
to spotlight the companies with (for what-
ever reason) the highest ratios, and they’re
the ones that will take the flak.
I’ve been deeply engaged in this debate
since it kicked off over the fast-rising
salaries of privatised industry bosses in the
early 1990s, and I believe it is a real problem
— not least because, as Mrs May also said,
the perceived unfairness behind it ‘embold-
ens those on the far left’. But today more
than ever we need globally ambitious and
aggressive UK companies, run by well moti-
vated world-class talent, much of which will
have to be hired from abroad. Distasteful as
this suggestion is to me, now would be a good
moment for Boris Johnson and his Business
Secretary Andrea Leadsom to signal their
disinclination to discourage that talent, by
putting the new pay-ratio rule on hold.Chink of light?
If there was the tiniest chink of negotiating
light in our Prime Minister’s discussions in
Berlin and Biarritz, the key to what might
happen next surely lies in the declining state
of the German economy and the pressure on
Angela Merkel, as she approaches the end
of her chancellorship, not to make matters
worse. The business confidence index of the
Munich-based Ifo thinktank fell in August
to its lowest level since November 2012, fol-
lowing a 0.1 per cent GDP contraction in the
second quarter; the third quarter looks like-
ly to show another negative outcome. With
trade in industrial goods accounting for
40 per cent of GDP, Germany turns out to
be peculiarly vulnerable to current global
trade tensions and economic headwinds —
while its government faces tight budgetary
rules that restrict the use of fiscal stimulus.
It’s often said that German business is
the most potent continental voice against