Just when it seemed Christmas and New Year really were finally over, it’s time to get the festive wear out one last time, for today is Fat Cat Wednesday. This is not (although Twitter followers might be forgiven for the mistake) a celebration of chubby moggies falling off the sofa. By lunchtime today, a mere two and a half days into the working new year, FTSE 100 bosses will have earned what many of the rest of us earn in a year: £28,200.
Fat Cat Wednesday is a jolting reminder of the extent of pay inequality in Britain, and pay inequality is the most visible part of an increasingly unequal world. It is a smart and memorable way of illustrating the reality of more complex numbers – like the one that shows the average FTSE 100 chief executive earns 129 times as much as their average employee.
Fat Cat Wednesday is, in PR terms, the equivalent of the November day when women start working for free, about eight weeks before the end of the working year. Or the two free hours that women managers put in each day. Or even the daily 12 minutes that young women give for free from the moment they start work.
Lobbying organisations including the High Pay Centre and the Fawcett Society are brilliant at highlighting the problem. It gets headlines. It keeps a stark and undeniable injustice in the public eye. But the problem isn’t going away. And it seems at least worth asking whether the tactic of the highly coloured example only underlines the powerlessness of those who want to challenge it.
When she launched her leadership campaign, Theresa May deployed a mission to tackle boardroom excess as a way of promoting her own small-town-woman credentials. This is the kind of pledge that needed close and sceptical examination – closer and more sceptical than the easy presumption that it was merely a way of branding herself as different from the other lot.
For May has form on overselling populist ideas. The impossible target of bringing immigration down to the “tens of thousands” (which turned out to be, well, impossible, and is unlikely to be any more possible out of Europe) played a significant part in inflaming the take-back-control rhetoric that was so potent for the Brexiters.
And so it has turned out, only a good deal more quickly than her immigration ambition was shown to have failed. In a matter of months her schemes to tackle corporate greed have been swiftly and effectively defanged. The idea of workers on boards, sentinels of the public interest who might be expected to demand to see some relationship between pay and productivity, was downgraded from compulsory to optional in her CBI speech in November. Plans to insist that companies publish pay ratios between top and bottom seem set to run into the same claggy mud, along with other ideas on stakeholder engagement and a code of good practice.
She is unlikely to want a fight with business when she has so many others on her hands. But if she did, she could take as ammunition a blistering report for the ethical investment organisation CFA UK that was published last week. It showed that in 2014 chief executives took home a median pay package just short of £2m. That is 82% higher than in 2001. But return on invested capital was up by less than 1%.
It comes as no surprise to learn that return on invested capital is not the preferred measure of most remuneration committees. They prefer short-term indicators, such as shareholder return and earnings per share. The report’s authors detected “a material disconnect between pay and fundamental value generation”.
Perhaps this is why being shocked and horrified by pay isn’t producing the results. Pay used to be taken as a proxy for value added. But it long ago ceased to have any genuine relationship with what matters. It makes you wonder if pay is the wrong thing to be measuring.
