No Willy

First some facts. Despite concern about \”fat cat\” public sector pay, only £1 in every £100 taken by the top 1% of Britain\’s earners at the moment goes to public sector people.

Not just no, bollocks in fact.

£100 in every £100 \”taken\” by the top 1% of Britain\’s earners goes to public sector people. For only the public sector has that monopoly of violence which allows them to \”take\”.

In the market sector it\’s a voluntary transaction: so \”take\” is the wrong word to use. \”Given\” perhaps, willingly offered, all sorts of synonyms and euphemisms. But the only people who take are those who insist that we must, through taxation, or thieves, but I repeat myself.

21 thoughts on “No Willy”

  1. Not too sure about that – in the same way that public sector workers are only theoretically accountable to the electorate, the bosses of large companies are not necessarily accountable to the owners of their companies or their customers.
    A lot of the large financial companies are owned in large parts by governments anyway, so it really is questionable that high levels of private sector pay are based entirely on voluntary transaction.

  2. @Mark: All private companies rely on customer’s repeat business. Doesn’t matter if you’re RBS, Shell, or Vodafone, you need customers. If they stay away, profits go down, and the boss probably gets sacked. If I don’t like how much Philip Green gets, I don’t have to shop in his emporia. Simple as that. If everyone followed my lead, he’d go bust.

    When I can take my council tax business elsewhere because I don’t like the fact that the head of my local council gets £250K/year, and that they waste vast amounts of money on everything else too, then I’ll consider your point.

    I cannot be arrested and thrown into jail for not shopping in Sainsburys, but I will be if I don’t pay my taxes. That’s taking money with menaces in my book.

  3. Isn’t another 51% (or whatever the rate of tax +NI is) of top earners pay “taken” by public sector employees?

  4. Jim,

    You are entirely free to move to another area of the country. The problem is that they all have similar levels of jiggery pokery so there isn’t really much point. In exactly the same way – I’m entirely free to choose between Barclays, Lloyds, RBS or HSBC – but what choice is that?
    Who decides the salaries for the management of large public companies? Management of large public companies – not individual share holders or the customers.

    Yes, to some extent the results of companies must be backed up by the service they provide to customers – but we could say exactly the same thing about government spending. Where no low tax council or low MD pay banks exist, there really isn’t any choice for an ordinary person who wants to live within modern society.

    The problem is that our individual choices mean very little if the majority of people aren’t interested.

  5. What you’re missing is that while market transactions are what typically take place between companies and their customers, transactions within companies mostly aren’t like that.

    The transactions being talked about in the passage you quote include those transactions where a chief executive settles on a compensation level. Those would almost certainly not be what we’d call market transactions, and the people who’ll get less of the company’s pie (because the boss gets more) aren’t free to take their labour elsewhere if they object. They have some freedom, but I’d suggest it’s more like the freedom to emigrate if you don’t like a country’s laws – i.e. a unusually costly freedom.

    So, ‘take’ may well be broad brush correct. At the very least, ‘bollocks’ in response is far, far too strong.

  6. @ Mark: You can choose the Post office,the Co-op, the Nationwide, Santander, a myriad of online banks, or putting your cash under the mattress if you want, all without moving house. In fact I counted 25 different current A/C providers in a quick search on moneysupermarket. I’ll bet the chief execs of a lot of those earn considerably less than the head of Barclays or HSBC.

    And anyway, if you have a free current account at Barclays, you’re not in anyway contributing to the pay of the chief. If anything they are subsidising you. You could pay in your salary every month, draw it out in cash immediately and never have anything in there. They gain nothing. You only contribute to their profits.

    If there was somewhere in the country I could move to where I didn’t have to pay tax, or it was considerably lower than the rest of the country I probably would. As would a lot of others I suspect.

    You don’t HAVE to give any of your money to private companies (except when the State forces you to, for example we are forced to buy car insurance), but even then you could not have a car, and ride a bike to work, or go on the bus, or train, or even walk. The market always provides options. You may not like them all, but there are options. There are only 3 options with tax – pay up, leave the county or go to jail.

    We all know if tax was voluntary no-one would pay it. All that makes us do so is the threat of incarceration, and the underlying violence inherent in that threat.

  7. Public sector salaries are certainly too high, overtaking the private sector and not taking account of public sector benefits like flexi-time and final salary pensions. However, outside of the public sector, I can’t understand this obsession with top salaries. I can understand a leftist arguing for maximising the minimum (maximin) but not their obsession with minimising the maximum (minimax) – particularly when they are highly selective in their targets because they tend to ignore the high earnings of footballers, entertainers and famous-for-being-famous ‘slebs’! Is egalitarianism a mental illness?

  8. “However, outside of the public sector, I can’t understand this obsession with top salaries.”

    Probably because it’s got very little to do with top salaries.
    It’s part of a campaign to stir up as much ‘class hatred’ & ‘ them & us’ as possible. It’s the ‘Plan B’ that followed the Labour electoral defeat. If you can’t govern the country make the country ungovernable.
    We’ve been here before.

  9. but even then you could not have a car, and ride a bike to work, or go on the bus, or train, or even walk. The market always provides options. You may not like them all, but there are options. There are only 3 options with tax – pay up, leave the county or go to jail.

    In terms of “which incompetent corrupt bastards shall I leave my money with”, “which incompetent corrupt bastards shall I buy my telephone service from”, and “which incompetent corrupt bastards shall I buy my electricity from”, there is no choice – they are all the same. And living without electricity or a phone would be *more* onerous than leaving the country…

  10. @john b: Look, if you want to, become a traveller. They buy no electricity, they need no mobile phones. They have no bank accounts (cash only mate), some travel by horse power alone, needing no petrol either. It is possible to live off grid in this country if you so choose.

    Or if you think there is a deep seated demand for services provided by low paid executives, set up your own business providing them. If plenty of people agree with you, you’ll prosper (of course you won’t pay yourself any extra if you are successful, as that would kind of blunt your argument a bit). If not, you’ll go bust. Simple. Let the market decide.

  11. Jim,
    I agree with Charlie and john b.
    I mean theoretically, if you hate taxes, you could build yourself a rowing boat and live by fishing and eating seaweed in the English channel. Or go and live in a hole in the ground.
    Likewise, it’s not realistic (or probably possible) to boycott all transactions that might enrich some of the fat cats.

    Paul ilc and Pete -Management hijack of publicly listed companies bothers me in the same way that high government pay or high bbc pay does (Chris Moyles urgh) – they’re working the system to their advantage and only receive the pay because they have the power to do so.
    Maybe we should be concerned about managers or “stars” pay in any organisation with diffuse ownership.

  12. I believe that the “market” which provides pay to top executives is very far from free, it has been completely captured by a relatively small group who sit on each-others compensation committees and award other group members outlandishly high salaries that are simply not justified by results. Your average MD makes F-all difference to performance. High salaries could only be justified by high penalties for bad judgement, like confiscation of wealth, and we don’t see that do we ?

  13. Or if you think there is a deep seated demand for services provided by low paid executives, set up your own business providing them. If plenty of people agree with you, you’ll prosper (of course you won’t pay yourself any extra if you are successful, as that would kind of blunt your argument a bit). If not, you’ll go bust. Simple. Let the market decide.

    It looks as though you intend this to show that transactions within companies must be fair; if they weren’t – you argue – a competitor with fair internal arrangements would spring up and outcompete the companies with unfair arrangements. For this to be true, you’d need to show:

    (a) That most customers greatly prefer dealing with companies that are internally fair, to the extent that they will prioritise this in their purchasing decisions;

    (b) That the internal arrangements of companies are transparent to customers, so that the preference described in (a) can be informed;

    (c) That barriers to entry into business are in practice sufficiently low for potential competition to get a toehold.

    Personally, I support pro-market, anti-trust interventions; competitition is often good. But don’t the same concerns that justify intervention to mitigate unfair advantage in the market for goods and services also justify some degree of scrutiny of a company’s internal arrangements vis-a-vis compensation deals? The law of the land doesn’t stop at the door of the office, after all.

  14. Look, the point is that no-one (apart from a few hand wringing liberals) cares two hoots how much the head of Vodafone gets. What they care about is whether their mobile works properly, and how much it costs. If Vodafone can provide me with the service I want at a price I’m happy with, I don’t care what they do with my cash. They can spend it all on guns and cocaine for all I care. But if their service is bad or their price goes up, my cash goes elsewhere. Simple.

    If there was pent up demand for ‘ethical’ businesses, then they would be set up left right and centre. The fact they are not tells me that (broadly) no-one wants them. Why is Waitrose not the biggest retailer in the land? They are a workers co-operative no less. But Tesco, that almighty Satan of the corporate world takes £1 in 8 (or whatever) spent on the High Street, despite paying Terry Leahy millions, and screwing their suppliers into the ground. This tells me most people want cheap sh1t and don’t care what you do with the profits.

  15. Look, the point is that no-one (apart from a few hand wringing liberals) cares two hoots how much the head of Vodafone gets.

    I’d bet quite a lot that that isn’t true; the other Vodafone employees making up much of the list of people who care two hoots about what happens at Vodafone. They just aren’t in much of a position to do anything about it. Yes, they can change jobs.

    The same applies, mutatis mutandis, to just about every salaried person in the country and, for that matter, everyplace else that a similar corporate culture is practised. In aggregate: a lot of people.

    People want cheap shit. They also want a decent life above and beyond what cheap shit gets you. I don’t blame people for wanting either of those things. But with respect to the second, the clearest picture of what can happen with a corporate compensation culture comes from the US, where median wage growth has completely stalled even as productivity has increased. That’s a bum deal for the people involved, despite all the cheap shit available to them. The extra wealth is there; they’ve contributed to it, but on the whole they’re not getting a piece of it. Maybe they should emigrate.

  16. Putting public sector pay to one side, why for, FFS, should I be concerned that the head of Y plc is paid £Xm? If my dividend is sound, why should I object? If I’m not a shareholder, why should I care? Unless, I suppose, I am infected with egalitarianism —- or the social democratic death by a thousand qualifications — and I turn a blind eye to the earnings of (largely untalented!) ‘entertainers’! (But, hey!, they are “working class”…)

  17. “I’d bet quite a lot that that isn’t true; the other Vodafone employees making up much of the list of people who care two hoots about what happens at Vodafone. They just aren’t in much of a position to do anything about it. Yes, they can change jobs.”

    We’re not talking about whether employees should be able to have a say in what the Chief Exec is paid though are we? (If we were I’d point out that once you allow the employees some input in what their colleagues get, you’re on a slippery slope. Fancy having to justify your salary to the ‘Workers Committee’ every year?).

    We are discussing whether customers (you know, the ones who part with their cash for the goods and services a company provides) have any great interest in what the management of said company is paid. The employees are not putting any cash into the business, so as far as I’m concerned they don’t get a say. They are also massively outweighed in number by the customers as well. I can see no evidence at all that customers care about executive pay one jot.

    The only people who have a reasonable right to put their oar in is the shareholders/owners of the business. If the management is overpaid, its the owners who should step to sort it out. It is their money after all. If they don’t they are obviously happy with the dividends and share price that their management is creating.

  18. We’re not talking about whether employees should be able to have a say in what the Chief Exec is paid though are we?

    No, that’s exactly what we are talking about: to the extent that they don’t have a say, some of their seniors are ‘taking’ money from them. To say that they shouldn’t have a say is actually a way of insisting that their money be ‘taken’, and so you end up disagreeing with Tim’s post. Or are you saying that they couldn’t have a say; i.e. it’s impossible for them to either consent to or dissent from a CEO compensation deal?

    The employees are not putting any cash into the business, so as far as I’m concerned they don’t get a say … The only people who have a reasonable right to put their oar in is the shareholders/owners of the business.

    While I agree that many – although not all – employees don’t get much of a say, why would you expect them to remain passive? If I demand that I should have a say, what’s your argument to persuade me that it’s wrong to demand that? Or are you going to wish me luck with it?

  19. “The only people who have a reasonable right to put their oar in is the shareholders/owners of the business. If the management is overpaid, its the owners who should step to sort it out. It is their money after all. If they don’t they are obviously happy with the dividends and share price that their management is creating.”

    But Jim we could say exactly the same (slightly ridiculous) thing about government workers. People working for the government are ultimately accountable to elected officials – if people cared about the high pay of local government officials they would vote for someone who would change it.
    Most people obviously aren’t interested and therefore government officials aren’t taking money from you, because you are a member of the lunatic fringe whose opinion can be safely ignored.
    If you really care about government workers pay, you should start your own country.

  20. Mark at 19 wins here.

    Specifically on “if the shareholders don’t mind, what’s the problem” – the majority of stock market capitalisation comes from individual private investors, mostly in the form of either their mutual funds or their pension funds.

    However, the people who actually get the votes associated with this capital are fund managers – financial services professionals. They get paid six-figure salaries, they hope to advance up the ladder and get paid seven-figure salaries, and view that as completely normal.

    Therefore, when it comes to voting on executive pay, they don’t see anything wrong in executives getting paid seven-figure salaries either.

    If executive pay votes went to the *actual* beneficial owners of companies – which is to say, everyone in the country apart from the very poor – then I’d bet serious money that they would not be so relaxed about executive pay levels.

  21. @Charlie: “No, that’s exactly what we are talking about: to the extent that they don’t have a say, some of their seniors are ‘taking’ money from them. To say that they shouldn’t have a say is actually a way of insisting that their money be ‘taken’, and so you end up disagreeing with Tim’s post. Or are you saying that they couldn’t have a say; i.e. it’s impossible for them to either consent to or dissent from a CEO compensation deal?”

    Well I was talking about whether customers cared what chief execs are paid. You brought up employees. Your point is invalid anyway, as you assume that any reduction in executive pay will be somehow shared among the other employees. I think you’ll find that any excess cash belongs to the shareholders not the employees. They might choose to give all the employees a (tiny) pay rise, or they might choose to take it in extra dividends. Their cash, their call.

    As for employees ‘demanding ‘ a say in the remuneration of other employees of the company – why should they have any say in it? Its not their company, it belongs to the shareholders. The shareholders own all the cash, assets and profits in the business and it is theirs to dispose of as they see fit. If that means paying mega-bucks to the chief exec, so be it. Its not my money, its not your money, its not the employees money, its the shareholders money.

    Which bit of that do you not get?

    @Mark: Indeed one could vote for a local councillor who would do something about high pay, I suspect many would if they could. Unfortunately the normal choice is the main three parties, all who are in favour of the status quo. But the analogy falls down – if I don’t like how much the chief of Vodafone gets, as a customer I can at least take my money away from the company. If I don’t like how much my local council chief gets I can vote for someone to change that, but if that person doesn’t win, (or even if they do) I still have to pay council tax towards it.

    @John B: I agree with you – in this technological day and age there should be some way of allowing the beneficial owners of shares to vote at the company AGM, rather than the insurance company having a block vote. Though I suspect even if such a mechanism existed, the vast majority of people would allow the insurance company to vote for them by proxy. But at least they should have the opportunity.

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