Sir Mike Darrington has become the first senior executive to break ranks with his peers and attack levels of boardroom pay
The former boss of Greggs, who built the bakery business into one of the UK's most successful high street chains, has become the first senior executive to break ranks with his peers and attack the level of boardroom pay in corporate Britain.
Sir Mike Darrington, who led Greggs for 25 years before his retirement in 2008, said: "The quantum of executive pay is excessive and must be reduced … if the current packages were halved, senior executives and bankers would still be overpaid."
Darrington, who was knighted in 2004 for services to business, has pledged to use his retirement to campaign against excessive boardroom pay deals. He hopes to encourage other like-minded business leaders to offer a critical perspective from inside the executive world.
In particular Darrington, 69, is keen to scotch the myth that attacks on executive rewards are attacks on business. "It is a smokescreen and a lot of bollocks – it is the greed of the people [at the top] that is anti-business." He has labelled his campaign "pro-business and anti-greed". He admits he had been sceptical about trends in corporate governance but claims remuneration has become such a toxic issue it must now be dealt with radically.
Darrington, who was born in Sussex but has lived much of his life in Jesmond, Newcastle, is seeking to build a broad base of support for a campaign to reign in executive pay. He is already supported by the High Pay Centre and corporate governance advisory group Pirc, but is keen to get public backing from fund managers and, ultimately, executives themselves.
In 2007, as Greggs chief executive, Darrington received pay, benefits and bonus of £901,000 and, a year later, retired having built up a pension pot of more than £2m. His pay was modest compared with peers. Since the group joined the stock market in 1984 it has grown steadily, becoming a FTSE 250 stock, and proving one of the few high street success stories during the recession. It continues to open stores, creating jobs, while many of its peers rapidly contract or go to the wall.
Unlike many politicians who have joined the debate on executive pay recently, Darrington is also happy to cite specific examples of what he sees as unacceptable excess. He attacked the decision this month by Barclays chief executive Bob Diamond to trim back investment banker pay by a third. "If profits are down [nearly] 40%, bonuses should be nil," he said yesterday at a governance conference organised by Pirc.
Also criticised were past pay arrangements for former Marks & Spencer boss Sir Stuart Rose and former Tesco chief executive Sir Terry Leahy. Darrington suggested that during Leahy's final years Tesco's share performance had been "good but not brilliant — and look what happened since". Some £5bn was wiped off the value of the group last month after Leahy's successor Philip Clarke delivered a heavy profits warning and attacked the company's "long-standing business issues".
Darrington also dismissed fears that companies taking a hard line on executive pay risked losing vital business leaders to rivals. It would be healthy to cut back pay to such a level that executives left, he said, as most companies had a rich pool of talent which could step up to fill any roles left vacant. "If you don't start to lose people, we have not gone far enough," he claimed, though he accepted a mass exodus might indicate inappropriately low levels of pay.
The increasing complexity of pay arrangements is another bugbear for Darrington. He said multiple bonus arrangements, purporting to be linked to performance, were "guilty of obfuscation".
Reflecting on the many cases of executives received big payouts despite manifestly poor performance, he said the complexity of remuneration arrangements meant shareholders "do not know what is going on until it is too late".
The Bank of England cannot be accused of half-heartedness in cranking up its money-printing presses. But two members of the Monetary Policy Committee wanted more Quantitative Easing.
Fitch downgraded Greece’s credit rating further into junk as experts predicted private lenders could yet block the country’s restructuring deal, throwing the eurozone back into crisis.
After months of threatening to boycott the North Sea over UK tax rates, Centrica has performed a U-turn after it increased its stake in British waters.
Hyperactive punters injected plenty of life into Shire on hearing revived gossip that the UK’s third largest drugs group’s days of independence are numbered. They chased the shares up to 2258p before they closed 23p higher at 2248p as rumours of a £16bn or £30 a share cash offer from an international pharmaceuticals group intensified.
Prince of Wales to attend speech where prime minister will focus on economic expansion and reducing unemployment
David Cameron will signal his determination to produce a pro-growth budget by saying he is sick of the dangerous anti-business snobbery creeping into national debate, promising his focus is economic expansion and reducing joblessness among young people.
In a speech to the Business in the Community charity, attended by the Prince of Wales, Cameron will mount a fierce defence of business. He will say: "In recent months we've heard some dangerous rhetoric creep into our national debate that wealth creation is somehow anti-social, that people in business are out for themselves.
"We have got to fight this mood with all we've got. Not just because it's wrong for our economy because we need growth and jobs, but because it's wrong for our society. Business is not just about making money, as vital as that is. It's also the most powerful force for social progress the world has ever known.
"The snobbery that says business has no inherent moral worth like the state does, that it isn't really to be trusted, that it should stay out of social concerns and stick to making the money that pays the taxes. Frankly I am sick of this anti-business snobbery."
The speech comes as chancellor George Osborne faces intense political lobbying for tax cuts to boost growth in next month's budget. The Liberal Democrats are openly campaigning for faster progress towards a £10,000 free personal allowance, funded by new taxes on the rich. Clegg even delivered a party political broadcast to say his plans for personal allowances would put £60 a week in the family household.
The Tory right, led by the former defence secretary Liam Fox, are calling for job-creating tax cuts for business, funded through a fresh round of spending cuts.
The Treasury is opposed to further spending cuts, but may be willing to move on personal allowances, so long as the Liberal Democrats embrace a deregulatory package designed to help young unemployed people.
Equally the Treasury is dampening talk of unfunded tax cuts saying the relative improvement in public finances is very marginal.
The Liberal Democrats, desperate to see an end to the squeeze on middle-class living standards, are proposing changes to higher-rate pension tax relief to fund the lifting of personal allowances likely to cost £5bn. An alternative source of funding for the personal allowance has been a version of the mansion tax by by introducing two new council tax bands for high-value properties. No 10 is sceptical of the proposals, but says it is looking at any ideas that will lift living standards andspeed growth.
Cameron will also turn on those criticising the government's work experience schemes in which young unemployed are offered up to 8 week's work experience in return for their job seekers allowance.
A number of firms have been targeted by campaigners to pull out of the scheme that they describe as workfare.
Cameron will say: "We see this in the debate on education, put a young person into college for a month's learning, unpaid – and it's hailed as a good thing.
"Put a young person into a supermarket for a month's learning, unpaid – and it's slammed as slave labour.
"Put a child into a great school run by a local authority – cause for celebration.
"Put them into a great school backed by a bank – and that is a cause for suspicion.
Cameron's unbridled defence of capitalism came as prominent rightwinger David Davis, writing in Prospect, attacked "crony capitalism", adding too many governments had been willing to place their faith in big business rather than small business. He said the coming budget was seen by his fellow Tory backbenchers as the last chance to secure growth in the UK ahead of the next election.
Davis urged the Treasury to "discover the kind of competitive attitude American anti-trust campaigners demonstrated in the middle of the 20th century" when they "spoke of the curse of bigness".
He claimed some of Britain's flagship companies contributed little to our economy and society. In 2009, Barclays made £11.6bn pre-tax profits from its global operations, but paid just £113m in corporation tax.
Davis spreads the blame for what he calls "the network state" across government departments: "Wherever you look in Whitehall the government is too close to big business. We need to drop the idea hat biggest is best, and that Britain's economic health is well served by focusing on a few multinational companies".
Just when the economic news was looking promising for President Obama, a barrel of crude oil is back over $100 and, in places, petrol is more than $4 a gallon. Will the price of gas hurt Obama at the polls?
Congratulations to John Harris on his excellent article about A4e and the perils of outsourcing (Nice work if you can get it, G2, 22 February). As he points out, A4e and others act like an arm of the state but with little transparency or democratic scrutiny. It is good to see a politician of the status of Margaret Hodge admitting policy mistakes and recognising that "private providers often don't provide well". Should a contract end and the work need to be taken back in-house, there are further complications. The expertise has often been lost by the local authority or government department. They then have to reinvent the wheel at great cost to discharge their responsibilities. Tony Clewes Walsall, West Midlands
• I work for a locally recognised, small, specialist welfare-to-work provider – typical of the sort that Iain Duncan Smith insists the prime providers of the now infamous Work Programme should be engaging with. We know from previous articles that, contrary to their assurances during the tendering process, prime providers are not engaging with organisations such as us. A great many of us had and still have concerns about how prime providers have been operating, especially with the "harder to reach" claimants who would need longer-term and more expert support usually provided by specialists.
While it is unfortunate that four members of staff from one of these providers have been arrested on suspicion of skewing the figures to generate more income, I wonder whether this is the tip of the iceberg. Perhaps deeper investigations should be undertaken. Jane Cattermole Senior employment manager, Employment Support and Retraining Agency Ltd
• As somebody who was unemployed for 18 months, I'm glad that MPs and the public are beginning to see A4e's shortcomings. I had a short experience with them and it was awful, with no help in finding work and the only work offered unpaid in a charity shop already over-staffed with other jobseekers from A4e.
I had to borrow money to fund a training course. When I got a new job, A4e got paid by the government for helping me into work even though A4e were no help and continued to get payments for me in work. In your article it says the total payments A4e gets from each person such as me is up to £13,000. Why doesn't the government give jobseekers control of this money, and let them decide how to best use it so they can learn a new skill or fund a university course?
I only needed £1,500, so the government would have saved £11,500. The government must let jobcentres do more and stop people like Emma Harrison making millions from unemployed people. Mark Judge Sheffield
• On Tuesday I listened to an original recording of Asquith talking about his people's budget. He made it clear that it was only fair that those who had most should pay more tax to help those who had nothing. Buried deep down in David Laws's article (Our ambition for fairer tax, 22 February), one politician has the guts to make the same plea.
As a retired person on a reasonable occupation pension, I have, so far, been virtually unaffected by the austerity measures. I would gladly pay some extra tax if it meant that more young people could get into work, but no political party is prepared to offer me that option. Increasing VAT was a regressive measure affecting all, but income tax does, or should, reflect ability to pay and, in David Cameron's "big society", fairness has to be one of his aims or it stands even less chance of capturing the public imagination. Maureen Panton Malvern, Worcestershire
• David Laws, while supporting a policy which will condemn thousands more, particularly young people, to unemployment, claims the only tax change possible is to reduce tax avoidance and scale back certain reliefs. But there is a much simpler "tax change" which could yield up to £10bn: add three extra divisions to council tax rates. Income and affluence levels are closely related to the value of houses owned and any tax is unavoidable. The small number with high-value properties and limited income would simply have to move – the fate which will apply to the large working-class families in London because of the new rules. John Pert Tonbridge, Kent
• Margaret Levy is no doubt convinced by her own claims about the Youth Training Scheme (YTS), and the purported features that, "by design", it was "intended" to have (Letters, 20 February). She omits to state that in 1982, prior to the development of YTS, the Conservative government had abolished the majority of the very agencies that would have been able to develop relevant youth training programmes in negotiation with and agreement by employers, trade unions and educationalists.
Those agencies, the statutory industrial training boards (ITBs), had close links with employers and the occupational fields they covered, undertaking detailed research into changes in skill requirements and developing qualifications directly linked to job requirements. They were run by boards that had employer, trade union and educationalist members. Some 55% of the UK workforce was efficiently covered by the ITBs prior to 1982, with a total staff of only about 20% of that of the bloated Manpower Services Commission, which was effectively an arm of government.
The reason for abolition of most ITBs, and disabling of the remainder, was clear: they would not have supported YTS as it was introduced, because it did not meet the skills needs of industry. If the ITBs had not been abolished, we might by now have the highly skilled, globally competitive workforce we so desperately need. Clearly, the abolition of the ITBs, espousedly to improve training and skills levels, has been an utter failure. Their reintroduction is urgently needed but, sadly, unlikely under the ideologically driven policies of the current government. Dr Leonard Holmes Reader in management, University of Roehampton
• Employment minister Chris Grayling is stalling for time by suggesting that the unpaid work schemes he has promoted to businesses are to be reviewed (Unpaid work scheme may be reviewed, says minister, 21 February). He is attempting to justify the unjustifiable: tens of thousands of people being forced into working for companies, including Tesco, the biggest private-sector employer in the country, which made profits of £3.8bn.
He talks of protecting small employers, but the reality is that "workfare" schemes are a multimillion pound industry. On an eight-week placement, Tesco saves £1,500 by not paying the minimum wage of just £6.08 an hour to people on placements. Many have reported that they do the same work as any other Tesco employee without pay.
Multiply this by the 1,400 workers Tesco says it took on placements in the last four months (Tesco under pressure to withdraw from unpaid work experience schemes, 17 February) and you arrive at £2m pounds in four months – £6m over a year. These savings on Tesco's wage bill are being subsidised by public money used to pay the subsistence benefits that keep those in forced labour fed.
The employment minister also states: "The idea of people being press-ganged to work for nothing to provide cheap labour for big firms is totally untrue." But as documents released by the Guardian show, the minister is disgracefully pushing not just the young, who face mandatory work activity for four weeks,into unpaid work, but also the disabled. In the case of those on disability benefits, there is no time limit on the period of servitude.
Referring to the plans, The Royal College of Psychiatrists has stated it would prefer the placements to be optional, suggesting that as it stands the vulnerable people they are aimed at have no choice in whether to participate.
Grayling should stop playing for time and move immediately to end the disgraceful schemes that are exploiting the most vulnerable to boost the profits of big business. Mark Dunk, Rhia Lawrence, Alexandra Sayer, Richard Donnell Right to Work
Even if you disagree on who is to blame for this crisis, the responsibility for getting out of it must still be shared
Let's be honest: if this eurozone did not exist, no one would now invent it. The key word in that sentence is "this". A smaller eurozone of more compatible, mainly north European economies – a nordozone or neurozone – could probably have weathered the post-2008 crisis of western capitalism, even with Maastricht's design flaws. Alternatively, a eurozone of the current size might eventually have followed from the creation of a political union, in institutions but also in hearts and minds, if and when that proved possible.
That would require a degree of fellow-feeling and inter-operability – so to speak – between Germans and Greeks comparable with that between New Englanders and Alabamans in the US, and (unless Alex Salmond, the Scottish nationalist leader, is to be believed) between Old Englanders and Scots in the UK. Still very different folks, but accepting large-scale redistribution of taxpayers' money from one place to the other; individually ready and able to move easily between and work in both places; having a common politics, budget, media and public sphere.
If only. If ever. But, as psychological counsellors tell depressed patients, you have to start from where you are. No obsessive rumination on what might have been. No regrets. Start from here. Make the best of it. Find a path towards something better.
That is what eurozone leaders insist they did this week. Their exhausting, day-and-night efforts must be acknowledged. They have worked hard to square many circles. It is easy to criticise from the sidelines. Nonetheless, this has to be said once again: they have not succeeded yet. It is not just, as the cliche has it, that they are still kicking the can down the road. Now they are kicking a Molotov cocktail down the road.
At the moment, there is still a solid majority in Greece for staying in the euro. Yet I find it hard to believe that the people of Greece can for months and years take the extreme pain demanded of them, with the only argument being "to leave the euro would be worse". The personal stories are already heartrending. The journalist, teacher, civil servant reduced to queueing at the soup kitchen. Students in a "lost generation" who have left the country or are about to. Unemployment at 21% and rising. An estimated 150,000 businesses that have closed. The minimum wage to be cut by more than one fifth. Thousands sleeping on the streets. The homeless by night; demonstrators by day. The octogenarian musician Mikis Theodorakis – a favourite with generations of German tourists – has called for an "uprising". And the government has to implement a bunch of further austerity and liberalisation measures over the next week, before it can get the €130bn bailout.
Sitting at his regular table in the pub, his Stammtisch, the reader of Germany's tabloid Bild may still mutter, "Well, they have only themselves to blame." But he would be wrong. It is true that a very large share of the blame lies with irresponsible, deceitful and corrupt Greek policies and business practices. But the scale of this mess, and the difficulty of getting out of it, also results from the fact that Greece was accepted into a badly designed, over-extended eurozone; that the way bond markets and banks (including German and French ones) treated that eurozone positively encouraged such irresponsibility; and that this bailout is as much to help those banks as it is to help Greece. So the blame must be shared.
Even if you disagree with that, the responsibility for getting out of it is still shared. This is obviously true so long as Greece remains in the eurozone; but even if Greece leaves, it will remain a member of the EU, and there will be a moral and historical responsibility that derives from having got into this mess together.
Then there's that troublesome thing we call, from the ancient Greek, democracy. Many European leaders privately agree with the German finance minister, Wolfgang Schäuble, that it would be better if Greece did not have an election scheduled for this April. Democracy? Ask the people? What an appalling idea. But the Greek people will be asked. Unless they are shown some realistic prospect of growth, parties opposed to the draconian terms of the bailout may yet gain a majority. No one will then be able (though some may privately wish) to follow Bertolt Brecht's famous ironic suggestion: dissolve the people and elect another.
At that moment, Angela Merkel will have more than a year to go to her own general election, which she is self-evidently determined to win. The eurozone will then be torn between the maximum pain that Greek voters will accept and the maximum price that Merkel believes German voters are prepared to pay. That dilemma – call it Merkel's fork – is just the most critical example of the deeper problem of this eurozone: the contradiction between already European policies and still national politics. You could have close, similar economies and still diverse politics (the nordozone that might have been). Or you could have fairly diverse economies if you had converged politics, with one eurozone election for one eurozone government. That common politics would then allow for the financial transfers to compensate for differences, as in the United States, and work towards economic convergence in the longer term. What is unsustainable is to have, within a single currency zone, both divergent national economies and divergent national politics.
So far as I can see, there are only two ways out of this. One is that Germany, all other European governments (including Britain's), the European Central Bank, the EU institutions, the IMF and every other relevant player work over the next few weeks, like Mozart in his most inspired frenzy, do what every sensible political economist (including many in Germany) says is necessary: produce a strategy for short- to medium-term growth as well as fiscal consolidation and structural reform. For as Mohamed el-Erian, the chief executive of the giant bond investment firm Pimco, observes, this week's agreement "leaves Greece's basic problem unresolved. The country still faces the prospect of too much debt and way too little growth."
That strategy for growth must not only be found, it must be seen to be found – seen by Greek voters, that is, before the next election. The other alternative is that, sooner or later, Greece leaves the eurozone. The former is more desirable, the latter more probable.
After councils and care units, now schools are being encouraged to imitate the department store's stakeholder structure
Once upon a time, we knew three things about John Lewis. One: it's a very nice, very middle-class department store. Two: it owns Waitrose, that very nice, very middle-class supermarket. Three: it is, or claims to be, never knowingly undersold.
These days, we can add a fourth: never knowingly under-referenced within plans to reform the welfare state. In 2010, London's Lambeth council announced an intention to remould itself according to the "John Lewis model". Last June, David Cameron unveiled plans to turn parts of the public sector into "John Lewis-style" mutuals. This week, a rightwing thinktank suggested turning state schools into John Lewis-like companies. A planned free school in Suffolk will be a John Lewis-style partnership, while an NHS hospital in Cambridgeshire and a care unit in Swindon already claim to operate along those lines. Even Nick Clegg has talked about making other firms in the private sector operate a bit more like John Lewis.
The John Lewis business model gives each employee part-ownership of the company, a share of its annual profits, and a say in how it is run. In theory, it makes employees more invested – literally – in their work, and so heightens both productivity and profits. At least, that's how it works at John Lewis itself. Critics argue that the right's proposals either only pay lip service to the scheme on which they are based – or are simply a way of making privatisation seem fluffier. This week's plans could encourage stakeholders (teachers, pupils) to work harder. On the flipside, they could also lead to the outsourcing of a school's management structures, and thereby make teachers less accountable. Suffolk's Breckland Free School has already outsourced its management to a private firm, and won't be overseen directly by the parents who set it up.
Lambeth's John Lewis council promised much – community involvement in exchange for council tax rebates – but has been criticised for playing an active role in privatisation. Only last week the council sold off a community-run arts centre to developers. And what of the Swindon care unit? In the words of cabinet office minister Francis Maude: "It's a mutual where there's no financial incentive. They will own it, but with no profit share or anything, no financial upside. They will have to take out 30% of their cost over the next four years and they are really excited about it." In other words, it's a John Lewis partnership, but without most of the rewards. Unless you count swingeing cuts as a good thing.
Nick Clegg's ideas seem the most appropriate interpretation of the John Lewis model: they're about making capitalist structures fairer. But proposals to turn public services into John Lewis-style firms seems slightly disingenuous. After all, the NHS – which gives citizens both a say in its organisation (at the ballot box) and a piece of its resources (in the surgery) – might already be the biggest John Lewis model going.
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