21 September 2011
SIR – Your leading article ("We need growth, not posturing, Mr Cable", September 20) is right to imply that boardroom salaries are not the number one priority for economic growth. But as a member of the Treasury select committee, I would suggest that executive pay, corporate governance and economic growth are intimately connected over the longer term.
Politicians should be resolute in distinguishing between crony capitalism and the capitalism of real entrepreneurship and risk-taking that will prove the key to our economic recovery. Too often it is crony capitalism that is setting the wrong economic and cultural incentives for British business.
Median total pay for FTSE 100 chief executives has risen by more than 400 per cent in the past 12 years. Yet the performance of those companies has done little to justify these huge returns, either in profit or stock market returns.
Why? One key reason is that, as my pamphlet Compassionate Economics argued in 2008, they are poorly owned. Good, effective and long-term ownership is the essence of real capitalism.
We have a system that rewards short-term thinking, positional gains and corporate gigantism. I disagree with Mr Cable on many things. But in focusing on effective corporate governance, and its centrality to our economic growth, he is right.
Jesse Norman MP (Con)
Hereford HR4
