A lot of anger is directed towards those in the corporate world who earn large salaries. Sometimes, in my view, that anger is not truly justified: for example, when an entrepreneur takes out income based on their ownership of a company, I -for one- tend to see it as just reward for those who take a risk with their capital.
However, listening to Martin Sorell on the Radio trying to justify his large remuneration, despite the objections of the shareholders in WPP was not an example of just reward.
The fact is that Martin Sorell does not own the company he founded and built any more- his ownership is less than 1% of the shares- which still represents £800 million- after several sales, not least following his divorce from his first wife in 2005. he may have founded it, and built it but now he no longer owns it.
However, Sir Martin, is insisting on a substantial increase in his remuneration, to reflect, as he sees it the success of WPP over the past year. Yet, he does not seem to know the difference between being an employee and being an owner. The actual owners of the company- the shareholders- are being asked to forego their just reward in favour of a man they now employ.
This is a major part of the current economic crisis: those who invest risk capital may lose all they invest, while the managers of that risk capital, receive massive pay-offs, virtually regardless of performance. More to the point, even when shareholders vote against a management remuneration package, the remuneration committee may overrule the vote, since it is deemed to be merely "advisory". Now the shareholders of WPP will show their displeasure by voting against the re-election of the chairman of the WPP remuneration committee in large numbers.
If Marin Sorell wants to take a higher reward, he should buy out the shareholders, whose money he took when he sold the company.
To my mind it seems clear that these votes of the shareholders should not be merely advisory, they should be binding. The fact is that in large public companies, the management are employees who do not, in general, put up the risk capital to fund the business. Yet, they take rewards out at levels that imply not only ownership, but preferential ownership- they take out more than the shareholders.
This level of greed is undermining the very basis of capitalism: that those who take the risk should get the reward. It is our pension funds and our savings that are being compromised by the cozy cabal of management and irresponsible asset managers. It is absolutely time that asset managers who invest on our behalf were forced to take their fiduciary responsibilities more seriously, and time that managements had a much greater discipline imposed on them: by tightening the law if necessary.