Old debate on executive pay raises its head
Is Nokia chief Stephen Elop worth €19m? The side you’re on is determined by where you sit
Is Stephen Elop, outgoing CEO of Nokia (and maybe the incoming CEO of Microsoft) worth €19 million? I have no idea. But I am willing to bet that the only people who answer ‘yes’ to that question are themselves at board level in major corporations (or have aspirations in that direction). Executive pay arouses much passion; which side of the debate you are on is mostly determined by where you sit: in the boardroom or not.
It’s an old debate with a couple of modern twists. It’s about how the economic spoils get divided. Emperors and monarchs have always had strong views on this, as do most of our gods. Marx gave us one way to think about the problem, Adam Smith another. Pink Floyd wrote a classic rock song about it.
The concept of “fairness” quickly enters any discussion about the distribution of income and wealth. That’s often where the debate goes pear-shaped.
The descendents of Marx think fairness means equality: the economic cake should be shared equally by all. Economic Darwinists insist that the size of the cake matters above all else and that redistribution will only shrink what is available and is therefore self-defeating. Most sensible people get a headache when confronted by all of this and suggest that some combination of market forces and modest redistribution usually seems to work tolerably well.
How well things are working has become a very topical question in the light of a stream of data about a very modern trend: the winner, it seems, really does take it all. From sports stars to CEOs, the rewards are increasingly fabulous. And the rest of the population - the 99 per cent - are stuck.
Growing income inequality in many countries is a much discussed and well documented trend. In the US (in particular) we have some new data that illustrates just how inequality seems to be accelerating. Most recently, in the last three years, the top 1 per cent captured 95 per cent of income gains.
Over a longer time frame, inequality grew between the late 1960s and the turn of the century because incomes of higher earners grew faster than the incomes of low earners - but both groups did see rises in real incomes. The relative position of the top 10 per cent really took off between 1990 and 2000. But real incomes for just about everybody (including the 0.01 per cent) were still below 2000 levels at the end of last year. Top incomes are growing again, unlike, for now at least, those of pretty much everybody else.