Wednesday, 24 June 2009

Independent Panels NOT the answer

All the main Parties are now endorsing an independent panel to set MP’s salaries and allowances. I am 100% opposed to this.

If the Independent panel comes back with £250,000 a year and £1,000,000 in allowances then the MPs will take it but say “Not down to us! We are only taking what the Independent Panel recommended” It will let the MPs off the hook.

Of course the Independent panel might come back with £25,000 a year and no expenses. Unlikely of course since the “Independent Panel” will be carefully chosen to make sure MPs get a good deal. It’s like the Remuneration Panel that large public companies use to set Director’s Pay. These panels consist of people who are unpaid and have no financial stake in the company for whom they are setting the Director’s Salaries and Bonuses. Great you might say, all fair and above board.

However, the people sitting on Company A’s Remuneration panel are Directors of Company B who have people on their Remuneration panel who are Directors of Company C who have people on their Remuneration panel who are Directors of Company A. Back round in a circle! If the Remuneration Panel of any one of these companies decides massive increases then the circle makes sure everyone else also benefits. In simple terms “You scratch my back and I’ll scratch yours!”

If the remuneration panels were chosen from ordinary shareholders then the results would be very different. Unfortunately if you want an example of how it will work in practise just look at the “People’s Peers” that Blair introduced to bring more ordinary people into the House of Lords. There weren’t very many ordinary working people on the lists that eventually made it to the ermine. The first 15 "people's peers" included seven people who already had knighthoods, the wife of a existing peer, three university professors and two others who had already received other honours from the Government. All but four were already in “Who's Who” I’m sure we all agree that this is a typical, everyday mix of people you might meet in the pub or walking down any typical British High Street on a Saturday Morning! NOT!!

So the “Independent Panel” will be packed by “insiders” and people who will be there to do the bidding of the government but who will then enable the government to duck responsibility for their decisions. Classic government slight of hand.

I would go the other way. I would say to MP’s “You pay yourself what you think you are worth, individually, you can write your own cheque every month for salary and expenses BUT every single penny you take will be published on-line every month for your electorate to see exactly what you think you are worth to them” This would require MPs to justify their claims to their electorate and even more tellingly to their colleagues and party officials. An MP claiming vastly more than anyone else would be shamed, an MP claiming vastly less would shame the rest. An amount would eventually be established where claims and public expectation would balance. Any MP outside the normal range would then need to be ready to justify themselves!

If you think it would never work then try reading some of the books by Ricardo Semler. In particular his book “Maverick” on the transformation of his company Semco. Using his philosophy, which included everyone setting their own wages, the company grew from $4 million US in 1982 to $212 million in 2003.

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