David Miliband, the front-runner in the Labour Party leadership contest, has argued that trade union members should sit on company remuneration committees to curb excessive pay deals.
In a blog post that will alarm City bosses but delight union leaders, the former foreign secretary said corporate pay deals have been set by “cartel-like” groups of executives who ensure salaries are always pushed higher, the Telegraph has reported.
Miliband argued the steady rise of executive pay, which had “economically catastrophic” consequences by contributing to the financial crisis, has had “more to do with a concentration of market power than individual business brilliance”.
He wrote excessive pay will only be properly checked if workers have their own representative on the remuneration committees. He added: “Recognised trade unions would be well placed to fulfill this role”.
Miliband argued: “Part of the problem is that the boards responsible for setting top pay are often filled by executives from other companies. This risks creating an almost cartel-like situation of ‘you scratch my back, I’ll scratch yours’. Consultants advising these boards warn they have to pay top rate or else they’ll never attract the best – which only bids up pay further.”