Commenting on remarks made by Prime Minister David Cameron over the weekend regarding excessive pay and shareholder power, Dr Richard Wellings, Deputy Editorial Director at the Institute of Economic Affairs, said:
“David Cameron has highlighted a genuine problem but is targeting the wrong cause. Crony capitalism is certainly an issue, but simply legislating for shareholder power is not the solution.
“Shareholders already have the ability to act on perceived excessive pay. The effect of further regulating listed firms will be to encourage more of them to go private. This will not solve the issue.
“In cases of excessive pay, often the cause is special privileges created by government - in particular, complex regulation that stifles competition and favours large firms over small ones, and subsidies and bailouts for banks and other big businesses. David Cameron must tackle these if he is to root out crony capitalism.”
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Notes to editors
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.
The IEA is a registered educational charity and independent of all political parties.