Saturday, 12 November 2011

Fat cats: do they deserve their pay?

In 'The Week' 5/11/11, the article "Fat cats: do they deserve their pay?" quotes Philip Hensher, writing in 'The Independent': "Do I care if their salaries are 60 times greater than mine? I do not". Thanks for that Philip. I do care that you don't care, though. You should read 'The spirit level' (see, and maybe you would start caring!

Hensher continues "paying them less wouldn't make anyone else better off." This is a rhetorical and obviously true point. We know that paying people more makes them better off (to be equally obvious) and if The Equality Trust is right, more equal income leads to fewer social problems.

Hensher works out that reducing former Tesco top man Terry Leahy's salary from £1m a month to more like £10K a week (how would he have coped?) would only save enough to pay all the other 260,000 Tesco employees a further £3.68 a month. I agree it's not much, but as Tesco's say, "every litle helps".

I don't know what a typical Tesco salary is, but let's say it's £20K pa. This means that even with Hensher's putative reduction, Leahy would have been paid for 2 weeks what the typical employee gets in a year - the order of 25 times as much. At £1m a month, Leahy was getting the equivalent of 50 years' typical salary in just one month. Was he really as effective as 600 typical employees?

We don't know from 'The Week' (nor I asume from 'The Independent' about the other high earners at Tesco, who would logically have to take a pay cut to ensure that they weren't out earning their boss.

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