Soaring rewards at the top are shocking but hardly surprising

This is a slightly edited version of a blog I wrote for work over at Any Other Business. There's more I could say on this subject, but for FairPensions' sake I try and keep a reasonably clear line between work and personal blogging, so I've left it pretty much as it is.

Last week it was revealed that the pay of FTSE 100 executives rose by almost 50% last year. The overwhelming impression for me was one of deja vu: last October saw a parallel media storm after the same research company announced that CEOs' pay had risen by 55% over the previous year. (This year's study referred to all boardroom pay, not just that of the CEO, whose pay this year rose by a mere 43%.)

Shocking? Yes. Surprising? Not really. Deborah Hargreaves of the High Pay Commission hit the nail on the head when she spoke about a 'closed shop' that needs to be broken open. A lot has been made of the idea of employee representation on remuneration committees as a potential brake on high pay. But at least as important as who should be on these committees is the question of who shouldn't be on them.

At the moment, cross-pollination among Britain's corporate elite means that theoretically 'independent' directors are often deciding on pay for people who, in turn, are responsible for setting their own pay. Hardly surprising, then, that they all continue to conclude that they're excellent chaps deserving of the most generous rewards. That's why, in the government's forthcoming consultation on executive pay, FairPensions will be arguing strongly for more robust measures to prevent conflicts of interest. Of course, it's not the only issue here, but it's an obvious place to start.

The real puzzle, then, is not why these committees keep ramping up top pay, but why shareholders - including those who look after our pensions and other savings - continue to overwhelmingly endorse them. An interesting snippet from the BBC report of last year's findings on CEO pay is that the researchers thought:

'shareholders were likely to be annoyed by what it called the "business as usual" approach to executive pay, after only a short period of restraint during the economic downturn'.

I say 'interesting' because, eminently reasonable though it might sound, sadly that assessment isn't going to be winning any awards for Year's Best Prediction. At this year's AGM season, when - as we've just discovered - pay packages soared out of all proportion to shareholder returns for the second year in a row, the reaction of investors didn't register much above 'mildly peeved'. Yes, there was noticeably more noise around executive pay than in previous years. But, for all that, not one FTSE 100 remuneration report was rejected by shareholders in their advisory vote.

[Edit: Since I wrote this, a newly released piece of research hints at why this might not be quite such a perplexing puzzle after all: asset managers' own pay rose by 18% last year, apparently due to "pressures to attract and retain talent" - exactly the same dubious justification that's usually trotted out for phone-number salaries at chief executive level. Indeed, some of the companies which faced significant opposition to their executive pay packages at this year's AGMs were themselves investment firms.]

The government is currently considering whether to strengthen shareholders' powers to veto remuneration packages. FairPensions has always argued that, if shareholder oversight is to have any meaning, shareholders need the tools to hold boards to account. But, crucially, they also need the will to use them. Perhaps ultimately it will fall to us, the individuals whose money is at stake, to strengthen their arm.

In defence of Early Day Motions

The best description I've ever heard of Early Day Motions came from my brother-in-law, who once referred to them as "parliamentary Facebook groups". I think this is a neat way of summing up what EDMs do and don't do. They don't lead to parliamentary debates (except in very exceptional circumstances); they don't change the law; but they do offer an opportunity for MPs to put their views on an issue on the record - and, if they get big enough, they tend to attract some attention.

After the 2010 election, a lot of the new intake of Tory MPs decided they weren't going to bother with EDMs. Some of them explain why in, er, this EDM. I agree with at least some of what it says: campaigners sometimes fixate on EDMs and mould supporter campaigns around them as if they are somehow an end in themselves, even though, as the motion notes, they "very rarely have any influence on policy". Sometimes NGOs can activate their supporter base without much thought as to whether the flurry of work this creates for MPs' offices is actually well-targeted to help achieve their aims. And yes, there are probably too many EDMs (although it's worth noting that the most frivolous, like this one about Countdown and this one about Coronation Street, tend to be entirely the MPs' own work and not that of "public affairs professionals"). I suppose I technically count as a "public affairs professional", although I work for a charity and not the sort of evil lobbying agency that phrase implies. I'm certainly quite selective in how I use EDMs - I find they're mainly useful for getting press coverage and for flushing out MPs who you don't yet know but who are sympathetic to your cause.

But this EDM also betrays a certain contempt for its signatories' constituents, complaining as it does of "the huge volume of correspondence" generated by EDMs. Guys, I hate to break it to you, but corresponding with your constituents is sort of in your job description. EDMs are one way in which voters can express their concern about an issue to their elected representative and ask them if they will register that concern. They seem to me to be a pretty efficient mechanism for doing that: I certainly can't think of a more efficient one. So by complaining about how much they cost, the anti-EDM contingent is basically complaining that democracy is expensive. Well, yeah. So is your second home. Shall we take that away as well? No, thought not.

Tabling an EDM to explain why you're not going to sign any more EDMs displays more than a well-developed sense of irony. It's an implicit acknowledgement of their real value: as one of the few truly open forums in which MPs can put their position about something on the public record. If you're so inclined, you can look up your MP's EDM record to get a sense of the issues they care about and the extent to which their views align with yours. It will certainly give you a much fuller picture than their voting record, unless they're an arch rebel. In other words, EDMs are one of the few tools that exist to help you hold your MP to account for what they do between elections. Perhaps that's not the function they were originally intended for, and perhaps they no longer fulfil that original function. But that's evolution for you. It's not the same as obsolescence. As one MP who I used to work with was fond of saying, EDMs get politicians off the fence. If you, a constituent, write to your MP and ask them to sign an EDM, they have to either sign it or refuse to sign it: there's no third option.

Except the Tories who have taken such a principled stance against this "waste of taxpayers' money" now do have a third option: they can stay on the fence, because they don't have to directly address your request, or indeed write back to you with anything helpful about their views on the issue at stake. Instead, they can just politely explain that, sorry, they don't sign EDMs. They are, perhaps not deliberately but very definitely, opting out of being held to account. And that's a poor way to thank the people who put them there.

St Paul's to re-open

I don't know, you wait two months for a blog, and then two come along at once...

Really this is just to direct you here and here to reports that St Paul's is re-opening after it turned out Occupy London wasn't really so much of a health and safety disaster after all. I feel sort of vindicated by this turn of events. (Also, the government really needs to learn where to get off telling protesters to 'pack up and go home'. And as for banning occupations... whatever happened to your fervent commitment to cutting red tape and trusting people? Oh sorry, my mistake, I forgot that only applied to businesses wanting to unfairly dismiss people. Citizens exercising their right to protest can clearly just fuck right off.)

Also, in the event that you'd like to take ringside seats, my friend and I are continuing to politely disagree over here at his own blog, which incidentally is strange and lovely and generally rather less shouty than this one.

What really happened at St Paul's?

The other day, I had an argument with a friend who was criticising Occupy London for 'making their protest a battle with the cathedral' by forcing it to close. Yesterday, I was told that the activist twitterati were pointing the finger for the cathedral's closure at the malign influence of its corporate sponsors. I think they're both barking up the wrong tree.

Now, at this point I should confess that I haven't really managed to make it down to St Paul's, due to work and stuff, so what follows is deduction based on prior experience and may be at least equally off the mark. But (and now I'm starting to feel like a third-rate Jonathan Creek) I've looked at it from every angle and this is the only way the sequence of events makes sense to me.

The question is, why did St Paul's cathedral swing so suddenly from welcoming the protesters with open arms to taking the pretty drastic step to close down until they leave? The anti-protester answer would be that the protest became so disruptive and unreasonable that they couldn't tolerate it any more and relations broke down. I just don't buy this. I walked past St Paul's on Thursday; a friend walked past at the weekend. We both got the impression that there was no problem with access and that things were generally – as these protests invariably are, if you bother to look past the headlines – good-natured and under control. Apparently the occupiers had rearranged their schedule so as not to disrupt any cathedral services with amplified noise, and generally went out of their way to be nice. What changed? This, to me, just doesn't add up.

The more cynical explanation that corporate sponsors were exerting pressure may be closer to the truth, but it still doesn't ring true to me. I see quite a bit of the financial sector in my day job – it's sort of my job to keep an eye on them – and frankly, I'm afraid I just don't think they care that much. In fact, it's been pretty fascinating to see the response from the more thinking elements of the investment industry, which, briefly summed up, seems to be 'yep, they've got a point'. In the last couple of weeks, I've seen fairly mainstream investors openly describe today's capitalism as 'dysfunctional' whilst commenting on the protests. To those who say that Occupy is having no impact, I'd say that admission is a sign of the times. So the conspiracy theory doesn't quite add up either.

But the cathedral's statement – all 'fire hazard' this and 'health and safety' that – forcibly reminded me of a couple of experiences I've had at the hands of people who wanted to suppress protests. And at this point, anyone who reads this blog at all regularly will know that, with tedious predictability, I'm going to point the finger at... yes, the police.

In the summer of 2008, I was at Heathrow Climate Camp, doing a shift in the kitchen. It was a bit more stressful than I'd expected, because the police made damn sure that the environmental health inspectors were round there to check us out. They did this because they were quietly confident that the hygiene standards of a bunch of hippies in the middle of a field could not possibly be up to scratch and that this would give them a reason to shut down the camp. Thanks to the awesome person co-ordinating the kitchen, who really knew their stuff and made damn sure everything was safe and clean, they failed.

A few years before that, I was sitting in Cambridge Police Station next to a friend with whom I was organising a student demo against university arms investments. And again, they made damn sure we were aware that, should we proceed in this foolhardy endeavour, we would be PERSONALLY LIABLE for the inevitable horrific injuries suffered by any unfortunate demonstrators who got mown down by rogue cyclists. The intention seemed to be to frighten us into thinking twice about organising a protest at all. In the event, all it did was to make me freak out about the need for stewarding and spend an unnecessary amount of time sourcing volunteers, hi-vis jackets and first aid kits.

My point is: this is the police's modus operandi. Health and safety concerns, and associated threats of liability, are a convenient tool for intimidating people who might think about organising or harbouring a protest. And, unlike beating disabled students over the head with sticks, it doesn't leave you on the wrong side of the argument. It's more subtle and sinister than that. Indeed, it seems to have been remarkably successful in making people – including my friend – view the protesters as the bad guys, the dicks who've forced the cathedral to close. Maybe I'm totally wrong, but to me this just has the same whiff about it as my experiences at Climate Camp and in Cambridge. I'd put good money on that the Met were, not necessarily wholly responsible for the decision to close, but certainly lurking somewhere in the background. (Something in today's news reports makes me wonder if the City of London Corporation is also at the back of it somewhere – but that's something I feel less qualified to speculate about.)

What worries me about this is that it seems to be terrifyingly easy to render a protest illegitimate precisely by restricting and circumscribing it. Occupy London couldn't go to the London Stock Exchange, because the landowners successfully got an injunction. (As an aside, I seem to remember that some FOI requests I was involved in a few years ago showed police contacting landowners to encourage them to seek injunctions against protesters.) So they found sanctuary at St Paul's. Now that the cathedral has closed – despite, it seems, the best efforts of protesters to make sure it could stay open – they're attacked for being there. To those who think Occupy London is culpable, I'd just make this small plea: I know, from bitter experience, that these things are never what they seem. Please think twice before accepting attacks, however seductive, on a protest's right to exist.

Time to break the habit?

Apologies for prolonged failure to blog; it's summer and I've been busy carrying a cello around Edinburgh. Anyway, work have once again kindly agreed to let me cross-post this blog I just wrote for them over at Any Other Business to tide you over. Usual disclaimer - No Wealth But Life represents my personal views only and has no formal affiliation with my employer, etc.

Kent County Council has become the latest local authority to come under fire for its investments in tobacco. Why it has been singled out is something of a mystery - as last year's Evening Standard investigation into London boroughs' investments showed, councils who don't invest in tobacco are the exception rather than the rule. But Kent's response is a perfect illustration of a seductive habit - one that may be comforting to investors under pressure, but is less than helpful to those around them.

Faced with media criticism of the pension fund's tobacco holdings, Kent's spokesperson did what investors in their position seem to have done since time immemorial: they fell back on the well-worn mantra, "We have a responsibility to obtain the best possible return on investments."

It’s standard practice for funds, when questioned about the ethics of a particular investment, to respond that their hands are tied by their duty to maximise return. But where does this duty come from? As part of the research for our recent report, I was lucky enough to trawl through pretty much every major court case on investors’ legal duties. I looked long and hard for the oft-invoked ‘duty to maximise return’, and I can confirm that the phrase doesn’t appear anywhere.

This isn’t to say that there’s no basis at all for this view: there is, as they say, no smoke without fire. What the law does say is that pension funds have a duty to act in the best interests of their beneficiaries, and that this will usually mean their best financial interests. But does that rule out disinvestment from particular companies on ethical grounds? Not necessarily.

There is nothing in law that bars pension funds from considering their members’ ethical views. Of course, it would be unfair for them to accommodate the views of a minority if this would result in a serious loss of income for the majority who don’t care. If excluding an investment was really going to damage returns, you’d have to be able to show a pretty watertight consensus among your beneficiaries that the investment was wrong. In the case of tobacco, this might be unlikely.

But what if an investment could be excluded without damaging returns? Lots of funds exclude investments on this basis: if you can show reasonable grounds for thinking an exclusion won’t make any significant impact – for example, because you can substitute another stock which behaves in a similar way – it should be permissible by law. In the case of tobacco, some campaigners have even argued that it makes positive financial sense to exclude it, because litigation and increasing regulation mean the tobacco industry does not have a long-term future. That’s also the view taken by Newham Borough Council, whose pension fund excludes direct investments in tobacco firms.

Of course, not every given exclusion will pass this test. But the important thing is that the test should be applied: if lots of members are unhappy with a particular investment, the fund should examine whether that concern could be addressed without harming the other members’ interest in a decent pension. Instead, too many funds fall back on the easy response of claiming there’s nothing they can do.

So if your pension fund invokes the ‘duty to maximise returns’ to justify an investment you think is unethical, ask them what analysis they’ve done of the impact of excluding that stock. If the answer is ‘none’, challenge them to explain why. They might not thank you for it, but it’s in everyone’s interest to help them break the habit.

I am extremely very busy doing spying

So, two heads roll at the highest levels of the Met over phone hacking. I can't say I'm crying for them, but it does beg the question why nobody resigned over Ian Tomlinson's death - and why Bob Broadhurst, in charge of Operation Beat-up-Climate-Campers on the same day, actually appears to have been promoted since.

When Paul Stephenson gave evidence to the Home Affairs Select Committee yesterday, he apparently repeated the line that investigating phone hacking was 'not a priority' in 2009 set against the terrorist threats the Met was expected to deal with. Frankly, I think he's got some nerve saying that on the same day the Court of Appeal overturned the convictions of 20 environmental activists on the basis of unlawful police infiltration.

The judgement criticised the police for effectively planting an agent provocateur (undercover cop Mark Kennedy) in the environmental movement, and then prosecuting dozens of peaceful protesters for the acts he encouraged. Kennedy was deployed by the shadowy National Public Order Intelligence Unit, which used to sit within the Association of Chief Police Officers, but in the wake of the scandal was transferred to - you guessed it - the Met.

Just for the record, the action for which those protesters were prosecuted took place in, um, 2009. Presumably the same 2009 in which the police were too busy to investigate phone hacking. The previous year, £5.9 million - including a substantial Met contingent - was spent on policing the Kingsnorth Climate Camp, another completely peaceful protest. So thanks, Paul Stephenson, for helpfully highlighting the hypocrisy of the police's insane vendetta against peaceful civil disobedience in general and the environmental movement in particular.

In other protest news, the CPS has finally dropped over 100 cases against protesters for sitting in Fortnum and Mason which should never have been brought in the first place. And, although this is not new news, senior officers have apparently admitted deceiving those protesters into mass arrests. Sadly a few others have received hefty sentences for lashing out against heavyhanded police, even though there's no evidence they hurt anyone (unlike the cop who left a teenager in a coma after last year's student demos - but then, that's obviously different).

Mark Kennedy - the saga continues

Well, this is currently making me feel pretty vindicated about this (and, to a lesser extent, this).

For those without the time or energy to follow links: it turns out the CPS knew about the infiltration of the climate movement by police spy Mark Kennedy at the time they were prosecuting 26 activists for thinking about taking direct action - and, more crucially, knew about the evidence he'd obtained that basically exonerated six activists of the charges they faced. The trial of these six activists collapsed when that evidence became public, after the activists themselves uncovered the spy. It's now being suggested that the convictions of the remaining 20 may be unsafe.

The CPS's position on Ian Tomlinson now looks even more absurd than it did before. It was bad enough that they refused to charge the officer involved because there was 'no realistic prospect of a conviction', based on nothing more than the testimony of a dodgy pathologist. It became worse when that pathologist's evidence was soundly rejected by the jury at Tomlinson's inquest, thus demonstrating that it might indeed have been possible to bring a successful prosecution.

But it seems like an obscene irony that, we now discover, the CPS was quite happy to proceed with charges against well-meaning activists who, let's not forget, hadn't actually done anything, despite having much more serious and credible evidence to cast doubt on their culpability. Of course, in this case there was a realistic prospect of a conviction - because, um, the police and CPS suppressed said evidence.

As ever, there are now calls for an inquiry - but, as this person points out, we've had half-baked inquiries every time a tiny corner of the huge festering mess that is the policing of protest in this country has been exposed. I wouldn't say they've made no difference at all, but there has to come a point where we stop chin-stroking about the symptoms and address the cause: police contempt for the right to peaceful civil disobedience, and the insidious rise of the category 'domestic extremist' which puts those who believe in it neatly in the same box as Abu Hamza and the BNP. There does need to be a proper inquiry, but it needs to be serious, independent and far-reaching - and most importantly, it needs to come at the issue with a respect for the traditions of civil disobedience and a willingness to ask the right questions.