Politicking over boardroom pay

On 28 November the soon-to-depart director general of the Institute of Directors, Simon Walker, spoke out against excessive boardroom pay, quoting Giuseppe di Lampedusa’s novel The Leopard: “If we want things to stay as they are, things will have to change.” Business secretary Greg Clark is seeking views by 17 February on proposed reporting changes, set out in a green paper published last month. Relevant question: do the chief executives of the four FTSE 100 property companies earn more than 147 times the average salary of their staff (147 being the average for FTSE 100 companies)? No. Land Securities’ Robert Noel earns 26 times average company pay; British Land’s Chris Grigg 45, Intu’s David Fischel 65, Hammerson’s David Atkins 38. But the closer you look, the less sense it makes to compare chalk with cheese. The aforementioned are minnows in terms of staff numbers. Most others are whales. The four propcos make the FTSE 100 by dint of billion-pound balance sheets. On average, chief executives in the FTSE 100 earn £5m. Grigg’s total remuneration last year was £3.7m; Atkins’ £2.1m; Noel’s £2m and Fischel’s £1.6m. The ratios are low because the average employee pay ranges between £56,000 and £82,000. If you think that’s high, it’s because, in two cases, it includes directors’ pay. If you think that’s low, it’s because the average includes the pay of staff tending shopping centres – in Intu’s case more than 2,000. What is the point of forcing firms to publish a meaningless ratio? Will Clark’s nakedly political initiative change anything? No. Minor changes to the reporting rules will ensure things stay exactly as they are. Ground rent rumblings Grumbling over ground rents grows louder, mainly due to housebuilders seeing rent sales as a steady earner. On 2 December Berkeley said income “would now be part of the ongoing core business”, rather than being treated as one-off windfalls. In the six months to October the group earned £27m from ground rent disposals. What is stirring political reformers on the all-party parliamentary group on leasehold and commonhold are clauses allowing big increases in ground rent (see EG, 5 November, p54). Last week Labour housing spokesman John Healey pledged to ban ground rents on new housing. On Wednesday the all-party group was due to meet for further grumblings. But how much do buyers know or care about the ground rent clauses tucked away in lease agreements? A personal tale: the lease summary said: “The ground rent is £125 per annum… and is subject to review.” Pah! That’s nothing. Even so, you dig deeper. The actual lease says the £125 is fixed for 25 years, subject to a “review mechanism”. You care even less. But, being diligent, you review the review mechanism. The ground rent will go up “by such proportion as the review value of the development bears to the first value of the development”. Three hundred words later: “Section 127 and Schedule 18 Part 11 of Rent Act 1977 as amended by Section 78 of Housing Act” pops up. The desire to inquire further flickers and dies, until anger at the cost of buying the freehold flares. Fabricating fears This week Indian housebuilder Xrbia said it wanted to build 430 sq ft flats in Britain and sell the prefabricated steel and concrete units for £80,000 each. Last week the Building Research Establishment set up a prefab in its car park designed by Bill Dunster’s Zedfactory. “Our revolutionary ZEDPod system delivers low-cost, factory-built, quality homes on stilts that stand over the bays of ground-level parking.” Everyone now also loves timber-frame, as they did in 1983. That year brick and block makers set up the “Campaign for Traditional Homes”. Granada’s World in Action produced a programme showing how well timber-framed homes burned. Timber’s market share collapsed from 24% of all new homes to less than 5%. The co-producer of the show, Paul Greengrass, went on to be a successful film producer. Where is Greengrass now? Making a film of Robert Harris’s book The Fear Index.