London’s Shareholder Revolt Is a Win for the 1 Percent

Depending on who signs your paycheck and what blogs you read, London has become embroiled in either “Bonusgate” or a “Shareholder Spring.”

Denizens of the City of London are masticating or ruminating (contingent on whether they’re bears or bulls) on the news that Andrew Moss, chief executive officer of the insurer Aviva Plc, has stepped down after more than 50 percent of shareholders voted against his proposed pay raise. He did agree to forgo it, but that wasn’t enough. Since Moss had been in the big chair, Aviva’s share price halved and its dividends evaporated. So he picked up his severance package with both hands and took the elevator. As one incandescent shareholder said, only two things were going up: executive pay and nonexecutive pay.

William Hill Plc, the London bookmaker, won’t be taking bets on whether its chief executive officer, Ralph Topping, will hold onto his paycheck after a similar shareholder revolt. Sly Bailey, one of the most ferociously prominent female executives in the City, was of her corner office at Trinity Mirror Plc, the newspaper publishers, after investors objected to her pay. Barclays Plc is trying to put an insouciant face on its shareholders revolting against the $28.7 million pay package awarded to its chief executive, Bob Diamond. The shareholders’ votes are not binding, but it is the sort of notice banks are happier handing out than receiving. There is something in the air.

Carrot of Capitalism

You may well think all this strikes at the very carrot of capitalism, that businesses have an obligation to hire the best and that the best have a right to charge whatever the market will pay. But politicians all over Europe and the U.S. have been calling for restraint, or at least delicacy in pay. An eight-digit bonus for the head of a business that is foreclosing on mortgages and calling in loans goes way beyond tasteless. Politicians reassure us that we are “all in this together,” but every grinningly unapologetic bonus and golden handshake shows that some of us are in it, but standing on the heads of others, who are as a consequence much deeper in it.

Europe’s most stable and generally happy societies are the bungalow economies of Scandinavia, where the distance between the gutter and the ceiling is the shortest. Francois Hollande, just stepping into the unrestrained grandeur of the Elysee Palace, has called for executive pay to be capped at 20 times those at the bottom of the ladder. It’s not going to happen, but in most European cafes and pubs that sounds like a very modest proposal.

The Occupy Wall Street movement sprung directly from this perceived inequality. It sprung, but it wasn’t Spring. In retrospect, despite the miles of liberal-egalitarian wishful commentary, it achieved very little. It wasn’t the rebirth of 1968, it wasn’t the vanguard of a new, youthful awareness and commitment to equality and fraternity (though, in Germany, an Occupy group applied for official permission before pitching its camp, and was given it). What it did give us was the slogan “We are the 99 percent,” which neatly identified and focused the anger of people suffering recession onto the 1 percent.

But to be in the 1 percent you only have to earn $380,000 in the U.S. I say “only” because the folks who are facing the U.K.’s Shareholder Spring are the top 0.01 percent and 0.001 percent who have seen their incomes steeple. The people who are taking them down are not the 99 percent but the 10 percent, or even other 1 percenters. Those who own stock and bother to turn up to shareholders meetings are the real forces of change.

Worth Every Cent

It’s not just individual shareholders -- it’s also the institutional investors who are beginning to feel uncomfortable with the unapologetic and willfully unconcerned boardroom venality. Ironically, one of the biggest investor-critics of Bailey at Trinity Mirror was Aviva.

Those readers -- and I expect there will be many -- who believe that corporate and banking remuneration just reflects the market, and that the pool of possible chief executive officers is shallow and rare, and that if you get a good one he or she is worth every cent (not least to the workers and the shareholders), and that to call for restrictions is just jealousy, bitterness and a misplaced general anger that should be aimed at politicians, also probably believe that the market shouldn’t be fettered or regulate its success.

Well, that would be all well and good, except that markets do fetter and regulate all sorts of things. Not least for the protection of businesses and consumers: monopolies, copyright, false representation, insider trading, to mention a few. Executive pay is increasingly seen to be set by those who themselves hope to gain from its largesse. Although it may be pegged to results, there is rarely a commensurate downside for negative outcomes. Improved figures too often look like a chief executive appropriating the wages of dismissed employees.

The voters in this Shareholder Spring are those who might in the future have had an interest in artificially fattened executive pay, but see it now as not just a serious drain on resources but as intrinsically bad for business, bad for the market. We may not all be in this together, but most of us are in the High Street, and avarice is not a good look.

And one can sense something else, something more nebulous: a growing realization that perhaps the market mythology and the headhunters’ black magic are mere guff and PR. There will always be executives whose decision making doesn’t live up to their tailoring, and there do seem to be an awful lot of them around right now. A glut, in fact.

(A.A. Gill, the restaurant and TV critic of the Sunday Times of London, is a Bloomberg View columnist. The opinions expressed are his own.)

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

    To contact the author of this story:
    A A Gill

    To contact the editor responsible for this story:
    Tobin Harshaw at

    Before it's here, it's on the Bloomberg Terminal.