Lord Taverne (the first Director of the Institute for Fiscal Studies, of which I was Founder Chairman) has proposed that all companies should report the ratio of salaries of senior executives to the average wage of the lowest 10% of their employees. He argues that this would shame executives into rewarding themselves more modestly. I heartily agree with his proposal. On page 108 of The Puritan Gift, my brother and I draw attention to the fact that the CEOs of US companies are paid 475 times the wages of an ordinary worker, which compares with eleven times in Japan and twelve times in Germany. Are American CEO’s really (475/11 =) 43 times more efficient than their Japanese oppos? The comparable British ratio is said to be 130. Are British CEOs really (130/11=) 12 times more efficient than their Japanese oppos?
Lord Browne was paid a huge bonus in his last year of office as CEO of BP because his remuneration package was tied to the compay’s reported earnings — but those earnings had risen sharply not because of his efforts but because the oil price had soared, for which he carried no responsibility. Lord Taverne’s initiative deserves strong support from all political parties.
Best wishes
Will Hopper, co-author The Puritan Gift
