It pays to show restraint

JOHN Donne wrote: ‘No man is an island, entire of itself …’ Top executives would do well to remember his famous dictum that we human beings cannot thrive in isolation.

Anyone running a FTSE 100 company has a right to be well paid. These are important and complex jobs.

The livelihood of thousands of staff depends on their job being done with competence, decency and flair. Their millions of customers depend on goods and services they produce.

And millions of shareholders, directly or indirectly, rely on their earnings and dividends to pay their pensions. Companies, large and small, are the engines driving the economies of the advanced world.

But they are part of a wider society. Everyone running a large corporation will have received education and healthcare.

They will live in homes built by other people, drive on roads paid for by taxation, use every moment of their lives the myriad advances and inventions that shape our modern world.

We all can do nothing without others – and we have to live and work with their consent. We are all, in John Donne’s words, ‘a part of the main’.

That is why executive pay matters. If it is seen by society to be intolerably high then it will be brought down. It has already fallen.

The accountancy firm Deloitte has calculated that the median pay for FTSE 100 chief executives has dipped 19pc in the past year.

The reforms set out by Theresa May this week will contain top pay further.

It is not just the absolute level of pay that most people would feel impossible to defend. Some of the detail – in particular the additional cash payments highlighted in our report today – would strike most people as quite outrageous. This will be stopped.

The question is whether it will be stopped by the voluntary action of boards, nudged by shareholders. That is the present approach, and one that makes practical sense.

But they should be well aware they fail, they will be compelled to change by legislation. Meanwhile senior executives should ponder the final line of John Donne’s meditation.

It is: ‘And therefore never send to know for whom the bell tolls; it tolls for thee.’

International flop

MARKS & Spencer continues to do its best to prove that Britain is not a nation of shopkeepers after all – or rather one unable to export its shop-keeping skills.

It is selling its 27 stores in Hong Kong, another stage in its retreat from its global aspirations. A year ago it had some 468 shops in more than 50 countries. Last November it confirmed that it would close 53 international stores and move out of 10 markets.

Now, it is moving its Hong Kong and Macau stores to a franchise model. They will be run by its existing partner Al-Futtaim, which already has been running 43 M&S-branded stores in seven countries.

All this makes sense. But it shows something else. For some reason M&S, like other great retailing names such as Sainsbury and Tesco, is unable to replicate its home market success when it sets up abroad. Why?

I don’t think there is a single answer. You could say that managers accustomed to one nation’s tastes can’t hack it when they have to cope with those of other countries.

But look at the way that Aldi and Lidl have revolutionised grocery shopping in the UK. Maybe Whole Foods, now with Amazon money behind it, will mount a similar challenge.

Just this week Amazon introduced hundreds of Whole Foods lines onto its US website. If that works, expect a similar offensive here.

What we do know is that British shoppers are adventurous. We not only buy a higher proportion of our goods online than people in any other major economy, we also buy a higher proportion of imported goods (try to buy New World wines in a French supermarket!).

Or maybe the explanation is that the British corporate world generates a certain cultural arrogance. We think we can conquer foreign markets, when we can’t.

Anyway, M&S is retreating from grandiose ambitions, and that is all to the good.

Sage advice

WARREN Buffett, the sage of Omaha, who was 87 yesterday, was in cheerful form.

His latest take? One, he hasn’t sold any Apple shares, though he would not say whether he was still buying. Two, favour shares over bonds, though it is harder to find bargains these days. And three, Kraft, which he controls, won’t buy Mondelez.

Retirement date? Not a squeak about that – investment is a long game.