Labour report on executive pay proposes giving customers a vote on compensation, ending share-based compensation for execs

Ten years of austerity in the UK have produced a definitive answer to the question: does austerity drive economic growth? (Spoiler: No)

The past decade has seen the UK dead last in advanced economies for wage growth -- the weakest decade for employee pay since the 19th Century! -- while executive pay has grown and grown, with the average CEO:worker pay ratio topping 1:150 (it was 1:20 in the 1980s).

A new report commissioned by the UK Labour Party (the largest Labour Party in Europe!) from Sheffield University Emeritus Professor of Accounting Prem Sikka proposes a slate of reforms to curb executive pay and the toxic behavior it drives, such as abusing workers and cutting back on customer service, service delivery, and quality.

The proposals include: making executive compensation public and publishing stats on gender- and race-based gaps in executive pay; ending stock-based compensation (which has been shown to incentivise financial engineering and short-term thinking) in favour of all-cash executive compensation; giving customers (and other stakeholders, including employees) a vote on executive compensation packages; and making executive compensation subject to annual, binding shareholder votes.

The measures would only apply to companies with more than 250 workers -- about 7,000 UK firms, who collectively employ more than 10 million workers in the UK.

Labour has not promised to adopt all of Prof Sikka's recommendations.

The report suggests employees and other stakeholders should have a say in setting boardroom pay in order to exert pressure for better distribution of income and improved quality of service for consumers.