May 2, 2016
We are seeing a winner-takes-all form of capitalism at the very top in IrelandPosted in Sunday Business Post · 98 comments ·
The gap between what the elite earns and the rest of us is causing a revolt.
Over the past few weeks, the massive disparity between the salaries and bonuses of some of Ireland’s ‘fat cat’ bosses, and the wages paid to employees of the same firms has become a serious issue for shareholders, and rightly.
Last week, CRH experienced a shareholder revolt over pay. Forty per cent of shareholders voted against a new plan that could earn chief executive Albert Manifold an annual bonus of more than €8 million, up from just over €5 million last year.
This shareholder revolt highlights the growing and frankly ridiculous gap that exists between the top brass of a company and the foot soldiers. The disparity between the boardroom and the shop floor has been a growing problem all over the world. Ireland is no exception.
Assuming that some workers in CRH are on the average wage of €40,000, the boss gets paid 200 times more than the average worker. This is questionable, to say the very least.
We are seeing a winner-takes-all form of capitalism at the very top in Ireland, where the few at the very pinnacle of Irish business make multiples of what is being earned by those below them. The market for the top Irish business people operates much more like the market for Premiership footballers than a market for the accountants that most of these people actually are.
The crux of this uneven sharing of the spoils stems from the advent of the winner-takes-all economy in Ireland.
This is not capitalism, but a flashy, show-off version of the old thing. It is very evident in sport, where the rewards for the winner are enormous, while there are few prizes for second place. So, for example, Raheem Sterling makes a fortune, but a talented winger in the lower echelons of football might only just get by. The talent gap between both players is probably modest, but Sterling is the winner and he takes the spoils. For years, sport and entertainment displayed this type of reward system.
In sport and entertainment, it was always understood that deciding to try to make it in these careers was a bit like buying a lottery ticket.
If you win, you could make hundreds of times more than if you had chosen a less risky career. If you lose, however, you earn much, much less.
Now, many professions work in a winner-takes-all fashion – arguably without much of the downside risk. So the best lawyers get paid multiples of the average lawyer’s earnings. The best accountants do likewise.
Look at the bar. There are those who make fortunes, and there are those who just scrape by.
Even in education, grind schools poach better teachers and pay them considerably more than the local school equivalents.
The reason for this is the hyper-competitive economy we live in. The stakes in every game have been raised enormously. If the best barrister can increase the likelihood that you will win the case, then he or she is worth the money.
Likewise, if the best teachers can give your child a comparative advantage and a place in college, then they are worth the price.
Similarly, if the best carpenter will make you furniture which you feel will distinguish you from your peers, he or she will be worth the price. It also exists in journalism, where the standout journalist – the one who is better known, a better communicator on TV or radio and therefore more public – makes more per word than other hacks who might actually be much better writers.
The winner-takes-all economy also works in the status vacuum that exists in Ireland.
How many times have you heard pompous, wealthy men saying: “I have engaged Mr Bigwig, senior counsel”?
This is not only a statement of fact, but a multi-faceted indication of where the pompous man sees himself in society, because only a certain type would either have the connections or the money to engage Mr Bigwig.
So the winner-takes-all economy, where rewards are skewed ludicrously to number one, embeds itself in society.
Being a mere worker or an average employee is simply not good enough. The entire society becomes obsessed with being number one, having the newest, biggest, brightest, latest car, house or kitchen, because with the winner-takes-all rewards come winner-takes-all possessions.
If society believes that it is totally defensible to have such a structure, those who get to the top are therefore to be admired. By extension, those who fall are to be shunned. We only want success, whatever that entails.
Ultimately, the gaps between the winners and the rest grow exponentially, as is happening in Ireland and has occurred in the US and Britain. And because most of the prizes and accolades go to the winners in the private sphere, the public arena gets marginalised.
This huge gap drives inequality, and obviously also drives a certain amount of political resentment. This is not hard to understand. If people see themselves falling behind and an out-of-sight elite pulling away, they will vote for the guy or girl who points at the elite and says, “They’re the problem.”
Inequality is what is driving the likes of Trump and Le Pen, and much of the Brexit debate, and it is also one of the reasons Fine Gael lost the election.
The political party that curries favour with the out-of-sight business community runs the significant risk of being turned on by the average voter. The solution is not to fix the political system, but to change the behaviour of those at the very top. This should be self-evident.