Unions call for greater action on executive pay and pensions gap

The committee heard union views on the pay and pensions gap at Lloyds Banking Group, which courted controversy last month after claiming staff were “comfortable” with chief executive António Horta-Osório’s pay because he is “a winner”.

Mr Horta-Osório receives a package worth £6.3m a year – 170 times the £37,000 average salary of Lloyds employees – which was approved by shareholders in April this year.

Ged Nichols, general secretary of Accord, told the committee that given Lloyds' struggles over the past decade including job losses, Mr Horta-Osório remains "not unpopular" at the company: "But whether people equate that to he’s therefore worth his weight in gold is another matter.”

Mr Nichols said he was surprised to hear Lloyds’ claims that staff supported the remuneration package, as multiple employees have contacted the union directly to voice their opposition. “I don’t think most union members will agree with it.”

Having an [executive pay] cap – whether it’s a voluntary one done by something like the Investment Association or a statutory one – would mean that things move in the right direction

Dominic Hook, Unite the Union

Unions object to Lloyds executives receiving a more lucrative pension scheme – at 33 per cent of cash salary, compared with the average 13 per cent offered to other staff and well above the maximum 25 per cent target set by the Investment Association in November last year – on top of a salary gap described to the committee as "immense".

The unions do not contest the principle behind a larger pension pot for chief executives in retirement – as the job they perform is difficult, they said – but rather the idea that executives should deserve a separate, more gainful pension scheme with a higher accrual rate.

“I think they should be the same,” said Mr Nichols, who added that enhanced profit sharing would encourage greater “community of purpose” at the bank.

Dominic Hook, the national officer for finance at Unite the Union, said the Lloyds dispute is a manifestation of a deeper malaise.

“Across the sector, there’s an issue about executive pay, as there is across the whole country, really, and people don’t see it as fair that there should be so many times more amount of pay for chief executives (and the pension that goes with it) as there is for ordinary staff members,” he told Pensions Expert.

Closing the gap

Hefty pay and pension gaps between executive staff and other employees have remained a hot topic since the 2008 financial crisis. But so far the government has resisted calls to explore statutory measures to curb pay inequality.

Mr Field, the committee chair, said executive pay was “an example of greed that undermines capitalism”. 

Mr Nichols said he hoped the government and the industry would take greater action. “We supported the High Pay Centre [think tank] in trying to bring greater justice into the remuneration policies, and I do think some of the work by the Investment Association is helpful,” he told Pensions Expert.

“I think that government could probably do more, and employee and other movements,” he added.

But Mr Nichols noted some reasons to be optimistic. “It’s interesting that the CEO pay gap has started to be reported, and I think that that will hopefully in itself bring about some pressure for those gaps to be narrowed,” he said.

Mr Hook agreed, and urged policymakers to explore a cap. He told Pensions Expert: “There’s a good argument for a cap. The people who are arguing against are the same people who argued against the minimum wage – that it’s going to mean that we lose jobs, lose competitiveness – and I don’t think that’s true.”

He added: “You could see a situation where having a cap – whether it’s a voluntary one done by something like the Investment Association or a statutory one – would mean that things move in the right direction.”