HUGH CORTAZZI According to recent reports, chief executives of top British companies are now paid 81 times more than the average British worker. The pay gap has nearly doubled in the past decade. There is no justification for this trend. British companies have not been notably more successful or competitive as a result of the huge sums they've paid to chief executives. In fact, the British and foreign banks that drove up the derivatives' market had to be rescued by huge injections of government funds. Some chief executives, such as Sir Fred Goodwin of the Royal Bank of Scotland, were paid very large sums even as they oversaw debacles that would have led to bankruptcy if the government had not stepped in. HBOS (Halifax Bank of Scotland) and Northern Rock paid their chief executives huge salaries and, without government intervention, would have gone to the wall. Many of these failed bankers have retired on over-generous pensions or received golden goodbyes. Board members also were paid generously for their time, although the failure of their institutions showed that they were asleep on the job and that many directors seemed to think that their only responsibility was to turn up for meetings. Public opinion in Britain has turned very critical of banks and their highly paid executives, since it became apparent that the banks were determined to pay huge bonuses to top staff involved in the lucrative business of financial derivatives. Excuses made for these proposed bonuses include the argument that if they didn't receive what many people in Britain regard as obscene rewards, they would move to other institutions that paid better and, as a result, the City of London would become less competitive in international finance to the detriment of the British economy. Banks prefer to ignore the fact that it was the astronomical sums involved in this money game that nearly bankrupted the economy and exacerbated the recession. Public opinion supports action to deter banks from paying excessive bonuses, but most of the suggested remedies have been vague and probably unworkable. Monetary incentives have a role in motivating staff, but the bonus system as it has developed in the banking world has encouraged greed. Each executive measures his status in terms of his level of rewards. We need to ensure that rewards to scientists and engineers are comparable with those in the finance industry. We also need to try to ensure that the gap between the pay of a chief executive and a shop floor worker is narrowed. The theory that the exceptional talents of executives and their capacity for hard work justify their high salaries needs testing. It is right to ask how much of their salary is due to insight, flair and hard work and how much to good luck and being in the right place at the right time. We need to ensure that real leadership qualities are fairly assessed and that bullying and ruthlessness are recognised as destructive to morale and loyalty. Much more effective pressure should be exercised by major shareholders on boards to curb excessive executive pay. In Britain, annual reports must contain a director's remuneration report. Shareholders can vote on this and, even though such votes are only advisory, a majority vote against the report at least makes the company think twice. One problem is that pension funds, whose votes count significantly, have a vested interest in keeping rewards high as they will reflect the levels of pay in their own companies. Although remuneration committees take into account comparable pay structures in other companies as well as the advice of remuneration specialists and head hunters, these people also have a vested interest in keeping pay high. The pay gap is an issue in all European countries in varying degrees. The gap also seems to be widening in Japan where the financial services industry appears to have drawn talent away from Japan's high-technology sector. - Japan Times Online