The soaring earnings of top bankers including the chief executive officer of Barclays Plc are having a “corrosive” effect on the U.K. economy, the High Pay Commission said.
Former Barclays CEO John Varley was awarded 4.4 million pounds ($7 million) for 2010, 169 times that of the average worker in the U.K. and 4,899 percent more than his predecessor earned in 1980, when the Barclays boss earned 13 times more than the average worker, the London-based panel said in its final report today. It urged FTSE 100 directors to end the “closed shop” culture where they award themselves high pay that doesn’t match their companies’ share-price performance.
“There’s a crisis at the top of British business and it is deeply corrosive to our economy,” said Deborah Hargreaves, chairwoman of the group, which was set up a year ago by Compass, a pressure group that seeks to influence opposition Labour Party policy. “When pay for senior executives is set behind closed doors, does not reflect company success and is fueling massive inequality it represents a deep malaise at the very top of our society.”
Prime Minister David Cameron has urged executives to show restraint on pay at a time when real household incomes are falling and public spending is being squeezed the most since World War II. Robert Diamond, who took over from Varley on Jan. 1, was awarded as much as 10.1 million pounds in salary, bonuses and stock, making him the U.K.’s top-paid bank CEO. The High Pay Commission called on the government to establish a body to track top pay.
Part-nationalized Lloyds Banking Group Plc paid its chief executive officer 75 times more than the average employee at the bank, compared with a multiple of less than 14 times in 1980, the commission said. Average wages in the U.K. have risen threefold to 25,900 pounds over the same period.
In 1980, Britain had a top income-tax rate of 60 percent on earned income and 75 percent on unearned income. The current top rate is 50 percent.
“What is completely unacceptable is that we have rewards for failure,” Business Secretary Vince Cable told Sky News television today. “We have extreme pay unrelated to performance. I want to see responsible capitalism.”