Why executive salaries have risen since 1980

From Mr David Bates

Sir: Top people's pay has risen disproportionately since 1980. Hamish McRae (13 July) finds an explanation for this in the operation of demand factors and warns us not to swing too hard against this phenomenon.

The story he tells is incomplete. Demand factors are not unconditioned starting points. They are a function of more basic economic and social dispositions. Changing technology is one of these, for sure. However, so are relationships between those, both individuals and groups, who compete for differential shares of the social product.

In the 1980s some sections of the population saw their competitive position undermined by deliberate use of political power: unemployment was one of the weapons used and another was legislation that put greater difficulties in the way of collective trade union action. Those who wielded political power were quite honest about the second of these. The top people simply did what was intended: they rewarded themselves with a bigger share of the spoils.

A large-scale empirical investigation into the history of this process might be illuminating. For the time being we will have to make do with such illustrations as come to hand. In the same issue of the Independent that contains Mr McRae's item, the investment column tells us about Cray Electronics:

Cray has been a catalogue of mismanagement, poor communication and missed targets - the combination of a pounds 27m bonus bonanza for its now discredited management and a halved share price this year have left investors with an unusually bitter taste.

Perhaps, after all, the "pat answer" (put on one side by Mr McRae) "that directors decide their own pay and are greedy" is closer to the mark than the unconvincing stuff about skills and demand.

Yours faithfully,

David Bates

Kirkham, Lancashire

14 July