CAPITALISM IN CRISIS

City advisers in stark warning over fat cat pay Housebuilders and banks in the firing line

CAPITALISM is in crisis amid burning anger over executive pay, an influential investor group has warned.

The public is no longer willing to tolerate bosses pocketing thousands of times the average wage, advisers at Pirc said.

In a radical call to ‘bring some sanity back into the system’, it said that unless firms act they could face an assault from the hard Left through ‘punitive’ taxes and pay caps.

And it warned that investors must share the blame for failing to tackle corporate excess.

Pirc, which advises pension funds and other City institutions, urged shareholders to vote down lavish deals at Barclays and housebuilders Persimmon and Taylor Wimpey.

Warning that little has been done despite rising anger, Pirc said: ‘Executive pay is like a corporate equivalent of the MPs’ expenses scandal, mixed with Groundhog Day.

‘The same gap between public expectations and corporate practice is exposed year after year, but with no resolution.

‘It is no wonder that the public has lost faith in the system.’

Investors vote every year on bosses’ pay at their company’s annual meeting, but the votes have no legal force and can be ignored even if a business loses.

Shareholders do get a binding say once every three years, when they are balloted on pay policy which governs how much a chief executive can earn in the future.

However, these are often waved through without criticism even when they later prove disastrous. The latest firms in Pirc’s firing line include Persimmon, which has cashed in on the Government’s Help to Buy scheme, which offers househunters loans from the taxpayer to get a mortgage when purchasing a newbuild property.

Last year former chief executive Jeff Fairburn was paid £39m, taking his total over two years to £85m, before quitting amid an outcry over his huge bonus.

His successor Dave Jenkinson trousered £25m on top of the £20m he got the previous year. Pirc said the payouts were highly excessive and inappropriate, and advised investors to vote against the company’s pay report.

It also recommended a vote against the election to the board of new chairman Roger Devlin, as he is also chairman of William Hill. ‘A chair cannot effectively represent two corporate cultures,’ Pirc said. ‘The possibility of having to commit additional time to the role in times of crisis is ever-present.’

At Barclays, Pirc said boss Jes Staley’s £3.4m pay packet was 34 times the average worker’s. It described this as being unacceptably high.

ISS, another shareholder advice group, has also recommended voting against Staley’s pay because it felt the board had not done enough to discipline him after he wrongly tried to unmask a whistleblower behind a poison pen letter about a colleague.

Meanwhile, Pirc said Taylor Wimpey boss Pete Redfern is overpaid because his £3.2m package is 44 times average pay at the developer. Redfern has also been under fire over plans to buy a flat from his firm at a steep discount, which he has now abandoned.

Others to have been criticised include WPP, where disgraced former boss Sir Martin Sorrell was paid £70.4m in 2015 before being forced to quit over allegations, which he denies, that he paid a prostitute on expenses. Sorrell is still in line for £15m under a longterm bonus scheme, WPP’s latest annual report shows.