IT is obvious that companies need to work harder to make sure that all their employees deliver the goods. This must apply to everybody, including CEOs, who are hired by shareholders to maximise their value. They should be paid a lot if they do well and fired without massive payoffs if they fail. It should be written into contracts that rewards incurred for profits that turned out to be little more than a mirage can be clawed back. It should be made as easy as possible for shareholders in a Plc to rein in their CEOs if they are doing badly; capitalism only works when owners are able to, and do, exercise their property rights.
But by the same token, successful business leaders who create billions in value should not be criticised for earning a lot. The aim must be to align incentives with performance, root out rewards for failure, make sure high pay is approved by shareholders, and improve corporate governance – not embrace the failed egalitarian policies of the past. This should not be about “curbing” pay – it should be about curbing undeserved pay, as determined by the owners of the business.
It is a shame, therefore, that everything Vince Cable touches becomes an exercise in class war and inflaming sentiment against “fat cats”. The good news is that a lot (though not all) of his proposals are sensible; as ever, the proposed action doesn’t match the rhetoric. But the damage caused each time politicians such as Cable deliberately stir up envy and anti-business sentiment is huge; it keeps eroding support for capitalism and makes it harder to have a constructive discussion on how to reform the system to make it better and to create more wealth for as many people as possible.
This poverty of debate is why City A.M. is today launching The Forum, a new daily comment section in our newspaper (see p24-25) and on our website. Our aim is to help debate, inform and provide a platform for voices interested in building a stronger, more prosperous free market economy. We will be inviting a range of guest contributors to pen articles for this section, including commentators, City figures, analysts, think-tankers, economists, business leaders, and MPs; crucially, we are also keen to publish the best articles, emails and tweets from readers. The City and Westminster are now talking a completely different language; The Forum will help bridge the gap. We are grateful to CityJet, the airline, for sponsoring our new pages.
Today’s contributions include a column by Ed Balls, the shadow chancellor, telling us why he thinks George Osborne is wrong; a provocative commentary by Sam Bowman, a brilliant young writer, on why we need more capitalism, not less; and a pithy op-ed by Michael Bear, the Lord Mayor of the City of London, on three policies he thinks would help the Square Mile. We also have a short, tweet-length note by Alan Miller, one of London’s top fund managers, arguing that exchange traded funds were wrongly blamed for the trading scandal that has cost UBS $2.3bn. Last but not least, we have a short tweet arguing that the euro must be saved.
You may not agree with some or all of these views. Neither do I. But that is the whole point. The Forum is about debating and discovering the solutions that will help us return to sustainable growth, create jobs, strengthen the market economy, boost personal freedom and help build a better world. Do join in.
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