Capitalists should worry about corporate pay too

It’s easy to mock Jeremy Corbyn. He rather sabotaged his own relaunch when he called for a maximum wage. But there is a problem with excessive executive pay – and capitalists can’t just laugh it off.

Make no mistake: a maximum wage is a daft proposal. They tried it in Russia last century, and still do in places like Cuba and Venezuela today. It’s fair to say it has been disastrous each time.

But that doesn’t mean there isn’t a problem with corporate pay. A survey of FTSE 350 companies published by the Lancaster University School of Management last month found that, between 2003 and 2014, average CEO pay rose by 82%, but the average return on capital was less than 1% per year.

In other words, the people who run companies are enriching themselves at the expense of people who own them.

Jeremy Corbyn offers retro socialism. Capitalists need to offer more than kleptocratic corporatism.

Few seem to understand that we now do capitalism without capitalists. We have diluted corporate ownership – so that shares are now held through third party organisations like funds and trusts. That makes it easy for managers to help themselves to other people’s capital.

We’re experiencing the resurgence of an old problem. In the eighteenth century, the East India Company became a byword for parasitism by expropriating not just Indians, but its own shareholders.

Poor corporate governance today is likewise sapping economic dynamism. The number of well run businesses and successful start-ups is declining – especially on this side of the Atlantic. Productivity is stagnant. That’s because capitalism has been corrupted.

So how do we fix it?

I’m working on a couple of ideas in my new book. One is to insist that directors don’t draw a salary at all, but own equity instead. Another is to give shareholders more power to control the management.

One way or another, free marketeers need to come up with a cure for corporatism. Otherwise, in a few years’ time, Jeremy Corbyn’s Castro impersonation won’t sound so stupid.

Theresa May won’t solve anything with more patrician Toryism

Theresa May is inching her way toward the idea that there is something wrong with executive pay, corporate governance, and lack of opportunity. But what is her answer? For all the fanfare, it appears to be just more patrician Toryism.

Writing in the Telegraph yesterday, the PM criticised “burning injustices”, called for “building the shared society” – and concluded that “it is the job of government … to correct the injustice and unfairness that divides us wherever it is found”.

Rather than looking for opportunities for government to intervene in people’s lives, surely she should be looking to create an economic and social system that doesn’t require ministers to intervene.

If she wants to reform corporate governance, why doesn’t she stop the people who manage companies from parasiting off the people who own them?

If she is serious about economic reform, why isn’t she breaking the producer cartels that dominate everything from energy to credit?

If she believes in equal opportunity, when is she going to do something about a monetary system that transfers wealth to those who already have assets, while preventing young people from buying a house?

There is a hugely important debate to be had about oligarchy. But we’re not getting it from the leaders of the big parties. For Jeremy Corbyn, the answer is 1960s Cuban-style socialism. For Theresa May, it seems to be pre-Thatcherite conservatism. Both have been tried before. Neither has worked.

The real answer is uber-liberalism – in the genuine sense of the word. We need to frustrate a system that allows an oligarchy to rule. My forthcoming book, Rebel, shows how.

Britain needs a bill of rights to protect press freedom

Mark Reckless and I refused to support plans to penalise the press when they were put before Parliament in what became the Crime and Courts Act 2013. We feared the new rules would restrict press freedom. It’s now clear we were right.

Section 40 of that act, on which the government is currently consulting (until tomorrow), would force media outlets that aren’t signed up to the state-approved press regulator to pay the full costs of any libel action against them, even if they are vindicated in court.

This is censorship through the back door. It means papers would avoid running exposés – about top politicians, for example – for fear of being sued, even if they are printing the truth.

Good news for vested interests in the Westminster cartel. Bad news for the public interest.

Free societies don’t do censorship. Elites should not be able to use the law to protect themselves from criticism. Super-injunctions and state regulation of the press allow the rich and powerful to do just that.

In the United States, Section 40 would likely be unconstitutional. The First Amendment enshrines the freedom of the press as a basic right.

Evidently we can’t trust our government to safeguard press freedom as a matter of course. We need our own bill of rights to make sure ministers can’t violate it.