It is reported today that UK politicians are seeking to block a pay rise for themselves recommended by an independent body. The IPSA, an independent body that acts as a policeman on MP’s pay and allowances is alleged to be recommending a pay increase of £10,000 per year for UK Members of Parliament. The politicians are rumoured to be very concerned about how the public would view such a rise in the context of UK standards of living decreasing over the last ten years with average pay increases being well below the rate of inflation
Caught in the pay paradox
Politicians are facing exactly the same paradox as remuneration committees. The expert, independent advice is that the CEO or CFO are underpaid against the market; but the remuneration committee knows that to give a large increase to the CEO to bring her up to market rates would be unacceptable. Caught in the pay paradox.
Not carrying out the recommendations risks MP’s falling further behind the market (is there a market for MP’s?), but granting the statistically justified increase would bring large amounts of unpopularity with the (voting) public. I hear echoes in the Great Hall of Westminster of “We are all in this together” dying an unpleasant and messy death.
A touch of real life
It is just possible that politicians will begin to appreciate the very real challenges of remuneration committees as they struggle to balance the demands of a thriving market in executive talent with the environment created by the politicians and the media that consider any pay increase for executives as some form of inherent evil.
How will this end up. I would guess that some messy compromise will be reached that will further distort the “earnings” of UK politicians; which will please no one and still result in a further dilution of public trust in the institution of parliament.
The pay paradox has been recognised for some time. There is no easy answer, if any answer at all. Politicians have designed and built a rod for their own backs. Remuneration Committees have the same issues before them in the current environment. Although I think it is unlikely, let us hope that UK politicians get a better understanding of the pay paradox as a result of this unfortunate farce.
What do you think?