Oxfam is once again touting redistribution as the solution to inequality. That’s a false promise. NGOs seem to see private property itself as the problem. But to reduce inequality, we need to recognise that the erosion of property rights is often what causes it.
Where it has reached extremes is in the pay of top corporate managers. In 1998, the average pay of a FTSE 100 boss was around 50 times the average UK wage. Now it’s 180 times.
But the issue here isn’t that getting rich is bad per se. The world as a whole is getting better off. We shouldn’t see wealth as a zero sum game – because it’s not.
The problem is that CEOs are being rewarded for failure. Their pay rises far outstrip any increase in the value of the companies they lead. Managers are gaining at shareholders’ expense.
Because shareholders have lost control. Their votes on managerial pay aren’t binding. And most no longer hold their shares directly, but rather through funds. The proportion of UK equities held by individual shareholders fell from 50% in 1953 to just 12% by 2010.
Redistribution won’t solve a problem caused by poor corporate governance. Moreover, do we really think one form of expropriation can be corrected by another? Shouldn’t we aspire to cut it out full stop?
Rather, the answer is to align the interests of managers with those of owners. CEOs should be made much more legally accountable to their shareholders. Corporate democracy needs to be restored.
To beat the CEO kleptocracy, shareholders must take back control.