Complaining about executive pay might give the TUC brownie points with union members, but it ignores the reality of a global economy where there is a fierce battle for senior-level talent. Having the right executive team can make the difference between a company’s success or failure, with repercussions for the whole of society, not just those at the top.

Now anyone who has worked in a British company will know that this is complete bullshit.  Most senior executives make it to the top of their organisations by a mixture of steady competence, political game-playing, back-stabbing, kowtowing, a lot of good luck and, perhaps, the occasional flash of brilliance.  A few are not even steadily competent but they make up for it by being better at all the other stuff. Large companies are bureaucracies. The qualities that lead to advancement in private sector organisations are, for the most part, no different from those required to achieve promotion in the public sector or in the old Soviet Union. 

The suggestion that our business leaders are creative, entrepreneurial risk-takers is not borne out by any evidence.  There is little, if any, relationship between executive pay and company performance.  Senior executives pay themsleves large amounts of money for mediocre, or even disaterously poor, performance. 

A report by the Work Foundation, published last week, concludes that company Chief Executives bear less risk than the average employee. At 14 per cent, the turnover rate among CEOs is less than the private sector average of 22 per cent, indicating that their employment is relatively secure. In the rare event of a CEO being fired there is usually a large pay-off to soften the blow.

The way in which employees who under-perform, or who fall out with their bosses, are dealt with by companies is a good indicator of their social status.  Once managers reach a certain level in the organisation they are rarely, if ever, subjected to the company’s official disciplinary procedure. If they are asked to leave there is usually a large payoff, much larger than the organisation’s standard severence package, and a period of “gardening leave” where they recieve their full salaries without having to turn up at work. All of this is much more than the organisation is legally obliged to pay. Even senior managers who have worked for companies for less than a year, in which case thay have no legal protection at all, often walk out of their jobs with hefty severence packages.

There is no economic rationale behind these payments but there is a sound social one.  When a senior executive is eased out of a company, all his peers think “there but for the grace of God”.  If the directors set a standard by which failure is cushioned with a large pay-off, it acts as an insurance policy should their own cover ever be blown.  The remuneration levels and severence payments awarded by senior managers to other senior managers are a fine example of class soldarity. The TUC can only dream of such fraternal comradeship.

Back in 1962, Barbara Wootton wrote a book with the catchy title, “The Social Foundation of Wage Policy”, in which she argued that pay was determined as much by social factors as by market forces – so that, for example, even when there is a surplus of doctors, their pay levels will not fall according to market forces because other doctors make sure that they continue to be paid at an appropriate level. The behaviour of our senior executives shows that her findings still have some relevance in 2006.  Indeed, the Work Foundation’s report argues that the excessive pay levels of senior executives amount to a “perversion of market principles”. High pay and rewards for failure have more to do with senior executives looking after each other than with performance in the market-place.  

Even more ridiculous is the suggestion that British senior managers might take advantage of the global war for talent and take their skills abroad.  OK, a few clever high-flyers may have transferrable skills but most do not.  Like most of the UK population, British executives have few foreign language skills so their scope for finding work overseas would be limited to other Anglophone countries and perhaps Belgium and the Netherlands. Are these counries so short of senior executives that they would need to import some of ours? I doubt it. In any case, most of these top managers are corporate salarymen who would be nothing without the power-bases they have built up in their own organisations over the years. 

Despite what the CBI says, if British senior execuitives were more heavily taxed, they would not all jet off to luctrative jobs abroad and, even if they did, their places would be filled by equally competent people rising up through the corporate ranks. It takes more than a few highly paid corporate placemen to build a successful economy - and to ruin one. 

Like all power elites, corporate senior executives need a self-justifying myth. Four hundred years ago Kings, and their sycophantic supporters, told our ancestors that royal authority came from God. Treason, they said, would not only be punished by death but also by damnation. Today’s corporate elites, and their cheerleaders, tell us that their pay is justified by market forces and that any attempt to tax or restrict it will lead to economic ruin for all of us. Neither of these stories has any solid evidence behind it. The assertion that the the pay of senior executives reflects the benefits that they bring to the British economy is as much a fairy story as the Divine Right of Kings. 

In the wake of the police investigations, a group of prominent Latin Americans write open letters to the governments of Britain and America, claiming that the British occupation of the Falkland Islands, the presence of British troops in Belize and the US interventions in Latin America are creating anger and resentment within their communities. Unless the governments of both countries  change their foreign policies, they warn, radical Latin American Catholic priests will find eager recruits for further terrorist acts.

Preposterous, isn’t it? Why would people from Bolivia or Columbia care what happened in Argentina or Belize? Sure, they might object to colonialism in principle but solidarity with other Latin Americans would not extend to blowing themselves up in the name of freeing Las Malvinas.  Any that advocated doing so would be considered insane.

And yet, that is what the Muslim leaders who sent that letter to the government and those who, a week later, trooped into Ruth Kelly’s office to present their demands, are asking us to believe.  That the UK’s Muslims, predominantly of Pakistani and Bangladeshi origin, are so enraged by the British army’s activities in Afghanistan and Iraq and by the government’s support for Israel, that some in their community are turning to terrorism.  Only a change in foreign policy, so we are told, will be sufficient to dampen this anger.    

Isn’t that even more ridiculous than my fictitious Latin American scenario?  At least the Latin Americans share the same language and similar ethnic origins, as well as the same religion. A few Pakistanis in Britain have some cultural ties with Afghanistan but most do not. As for Iraq and Palestine, they are far away places of which most British born Muslims have no more understanding than anyone else. If they went to live there, most of them would be like fish out of water.

In his video, terrorist bomber Mohammad Sidique Khan excused his actions, saying:

“Until you stop the bombing, gassing, imprisonment and torture of my people we will not stop this fight.” 

His people? Khan was born in Leeds and his parents were from Pakistan. What made him decide that Iraqis, Afghans and Palestinians were his people?

Muslims in Britain have not always been so outspoken in their support for other Islamic countries.  Britain’s invasion of Egypt in 1956 and its backing of Israel in 1967 and 1973 did not give rise to violence and blood-curdling threats from British Muslims. Even the term ‘Muslim Community’ is relatively new. Twenty years ago, Muslim ethnic minorities in Britain were identified by their countries of origin rather than their religion. The first hint of this new Muslim identity was during the first Gulf War, when some British Pakistanis opposed the UN sanctioned response to Iraq’s invasion of Kuwait, choosing instead to support an Arab tyrant because he was a fellow Muslim.

So why, over the last fifteen years, has the emphasis on the Muslim identity become so much more important? What is it that has made a new generation of British Pakistanis see themselves first and foremost as Muslims?  Why do some feel this so strongly that they can murder their fellow citizens in the name of people that they have only seen on the TV?  

The case is controversial because the former Nat West employees have been extradited under the 2003 Extradition Treaty which the UK incorporated into law but which the US Senate has not ratified. However, today’s Financial Times argues that they could have been extradited under the previous 1972 treaty and that, by neglecting to ratify the treaty, “the senate has provided a perfect smokescreen for three men who have a real case to answer.”

The extradition of the Bermingham Three will send a shiver through the management teams in many British companies. Many UK companies are already subject to American legislation and regulation, even if they do very little business in the USA. America’s willingness to seek the extradition of foreign executives gives these regulations real teeth.

After the collapse of Enron, the US government brought in a number of measures to try to prevent anything similar from happening again.  One of these was the Sarbanes-Oxley Act.  There is fierce debate over whether this measure will be effective. Many commentators see it as a tick-box exercise which enables the US government to be seen to be doing something but which will not stop further corporate abuses.  What is beyond doubt, though, is that it is proving a major headache for British businesses.

The Sarbanes-Oxley Act applies to any company that is registered with the Securities and Exchange Commission. This includes all British companies that are listed in the USA or that wish to raise significant capital there. Even companies that are not SEC registered may also be covered. Last year, Alun Jones QC warned that the directors of British companies with just one US shareholder could risk prosecution if their reports are not compliant: 

“A director of a publicly listed UK company could be extradited to the US to be tried for fraud if his company’s allegedly inaccurate reports are published in a US newspaper to a solitary US shareholder.”

“Many UK companies still believe that they need a US listing or a large US shareholder base before they are subject to US laws such as Sarbanes-Oxley but this is not the case.”

Non-compliance with Sarbanes-Oxley carries stiff penalties. Chief Executives and Chief Financial Officers are personally liable under criminal law for any breach. Failure to comply carries a potential £3million fine and twenty years in prison.  For this reason, although most of the compliance work is routine, many CEOs and CFOs are doing a lot of the work themselves. Usually, they would delegate such activities to more junior staff but when there is even a small risk that they might have to spend two years on remand in a US jail, most executives want to make absolutely sure that that their companies are compliant.

This is having a detrimental impact on their performance.  One CFO that I worked with said that she spends most of her time on Sarbanes-Oxley compliance. Another reckons that worrying about SOX, as it is often known, keeps him awake at night.

In a recent FT article, Eric Hutchinson, chief financial officer of Spirent Communications, described the burden of SOX compliance: 

“Think about your morning routine. We all get up, clean our teeth and have a cup of tea. Well, imagine you have to document all that, explain any deviation from the normal routine and get your partner to certify it, and every now and again an auditor will come round and check you’ve done it. That’s what it feels like complying with Sarbanes-Oxley.
 

“People are spending so much time thinking about controls on the business that they are not thinking about the business itself. It’s getting in the way. There’s a danger you can be taken over by Sarbox.” 

Last year BOC estimated that the cost of complying with SOX would cost the company £20million. It’s not just UK companies that are worried.  German chemical producer BASF estimates that it may cost $30m a year to comply with the US regulations. 

The combined effect of the Sarbanes-Oxley Act, the 2003 Extradition Act and America’s financial dominance has been the imposition of tough new regulations on  British business, yet there has been almost no outcry from the ‘sovereignty’ brigade. Those who usually complain about over-regulation, red-tape and foreign interference have barely mentioned Sarbanes-Oxley.  I doubt if anyone in UKIP has even heard of it.

Here we have a law which is tying British business in knots, enacted by a legislature in which Britain is not represented, yet our politicians and our press are silent.

Imagine if regulations with even half the impact of SOX had been enacted by the European Commission. Most of the British press, the Conservative Party and all the assorted Euro-haters would have protested to such an extent that the UK would have demanded an opt-out clause by now. With US legislation, though, such an opt-out is not negotiable. Perhaps that is why those who bang on about sovereignty have kept quiet. Sarbanes-Oxley Act clearly demonstrates the limits of British sovereignty. The US can demand that its business regulations are adhered to by foreign companies because of its economic and political clout. That gives it much greater power over what our companies do than anything the EU could dream up.

Two of the main criticisms of the EU from the anti-Europe lobby are its imposition of red-tape and its threat to British sovereignty. But if the UK withdrew from the EU tomorrow, British firms would still have to comply with Sarbanes-Oxley and British executives would still be threatened with extradition to the US to stand trail. 

For the larger British companies, the deadline for complying with Sarbanes-Oxley is this Friday.  The Bermingham Three may not be the last British executives to find themselves flying to America to stand trial for a breach of US financial regulations.

Outside the South-East, the problem is much less severe. Most of England has had a dry winter but only the area within 70 miles or so of London is deemed at risk of drought. This is partly because south-eastern England has less rain in an average year than the rest of the country.  Thames Water’s antiquated leaking pipes don’t help either. The main cause of the problem, though, is that there are just too many people living in and around London.  Like the shortage of housing, traffic congestion and high property prices, the water shortage could be eased by rebalancing the population.

Yesterday’s Regional Trends report from National Statistics shows the population of London and the South-East continuing to rise and that of the North-West, North-East and Scotland falling.  Most of the jobs created by Britain’s buoyant economy are located in the London area and so people have been moving south.  Britain’s population, like its economy, is becoming increasingly concentrated in the South-East.

Market forces are unlikely to correct this imbalance, at least, not until some major environmental disaster occurs.  To rebalance the country’s economy and population requires government action.  I don’t mean the usual offers of grants for companies to relocate to the North, or the transfer of Civil Service clerical activities to the provinces.  This has been tried before and makes only a marginal difference.

No, the only power that the state has to reverse the shift to the south is to completely relocate the government. Not just the low to medium grade civil servants but the whole Whitehall bureaucracy. The Prime Minister, the Cabinet and Parliament should move north permanently, to one of the major cities, such as Manchester or Leeds. We could even build a new house for the Queen somewhere on the Lancashire or Yorkshire moors.  

At a stroke, such a move would transfer people and government spending away from London, which doesn’t need them, to a city like Manchester, which does. Pressure on property prices in the South-east would ease and Manchester and the surrounding towns would get a welcome injection of capital.  The 150,000 permanent civil servants moving from the South-East would be joined by the Westminster Village.  The ‘allied trades’ of British politics, the journalists, lobbyists, political lawyers and spin doctors would all have to move north too, bringing jobs and spending power with them.

Relocating the government to Manchester or Leeds would bring it closer to the geographical centre of the country and reduce the dominance of London over the rest of Britain. London does not need the government.  It would continue to prosper as a centre of international business, finance and culture even if it was no longer the county’s capital.  The reduction in congestion and the availability of cheaper property might even stimulate further growth for the city.  New York manages to support itself without being the capital of the USA, so London could do just as well.

Of our G8 partners, four of them have their business and administrative capitals in different cities.  The three emerging economies, China, India and Brazil all have their main commercial centres away from their capitals.  The Japanese parliament is actively considering moving out of Tokyo.  That would leave the UK in the company of over-centralised France and Russia, in having its commercial and governmental capitals in the same city.  

Much of the cost of the move could be offset by selling off government buildings in central London. Many of them are in prime locations and would sell for a lot more than the cost of similar offices in the North. The Palace of Westminster would make a great conference centre and think how much rich tourists might pay to stay at Number Ten.    

Separating our government from our main commercial centre would redistribute the population and the economic activity in Britain. It would regenerate a city like Manchester and its surrounding towns, reduce congestion and pressure on land in the South-East and enable us to cancel the third runway at Heathrow.

But if none of these arguments convince you, the clincher surely has to be this – moving the government to Lancashire or Yorkshire would mean that a lot of media luvvies would have to move from North London to the real North. It would be worth doing just to see the looks on their faces.

Ayaan is still under death sentence from various Islamist groups, so as you would expect, security was tight. We were all frisked and had our bags searched before going into the cinema. My friend had her apple and bottle of water confiscated. The security guard said that they could potentially be thrown at the stage. We managed to get seats in the second row so I ended up sitting behind Ayaan. She was accompanied by three very tall, shaven headed men, who I assumed were Dutch police. The British police were also there in strength and the ICA had beefed up its own security. In the event, there was no trouble, not even any heckling. There were a few mildly hostile questions at the end but that was as dangerous as it got.

Friday night was the first time the film Submission has been shown in public since it was on Dutch television last year. It is only eleven minutes long and shows a veiled woman saying Islamic prayers, then describing how, although did everything Allah asked, she was raped by her uncle, whipped for having premarital sex then forced into an arranged marriage with a man who beat her. The film cuts to a shot of a naked woman covered in whip scars. The perpetrators of these crimes all quoted the Koran as justification for their actions. The woman is shown both totally covered and in a see through burka, which reveals her naked body, covered in verses from the Koran. Submission was only shown once on Dutch TV but that was enough to cause an outcry from Muslims and the death of the producer, Theo van Gogh. Tim Garton-Ash asked Ayaan whether she thought the film would ever be screened on British TV. She replied that so far, there hasn’t been any interest.

In the discussion that followed, Ayaan argued that multiculturalism is at odds with the Enlightenment tradition. Multiculturalism promotes group rights and while western liberalism was, at least originally, about individual rights. By defending the rights of minority cultures, liberals condemn individuals within those cultures, such as gays and women, to suffer oppression. Individual rights are seen as fine for other westerners but not for members of minorities. We would rather turn a blind eye to the subjugation of women than criticise Islamic culture. In this way, multiculturalism trumps feminism and gay rights.

Ayaan described this as ‘lazy liberalism’. It is not a considered stance, just one that has grown up over time because liberals are too lazy (or too scared, in my view) to confront oppressive cultural norms. “Feudalism has returned to Europe,” she said, “but it is wearing a different jacket.” The gains of the Enlightenment are being lost as western opinion formers shy away from tackling oppression and religious superstition. The results of multiculturalism, then, run counter to the western liberal values that emerged from the Enlightenment.

Needless to say, some people in the audience took issue with her but did not make any strong counter-arguments. At the end of the interview, Tim Garton-Ash said that it felt like sitting with Kant or Voltaire. Ayaan Hirsi Ali, he said, was a true champion of the Enlightenment. I too was impressed by Ayaan, not just by her obvious intelligence and the power of her arguments but by her calmness and her sheer guts. Here is a woman who did not grow up in Europe and was brought up in a very different culture, yet she has become a champion of western liberal values. So much so, that she is prepared to risk her life in defence of them. How many of us native Europeans are prepared to do that? She cares more about our tradition of freedom and individual rights than we do.

In the Netherlands, though, at least some political figures are directly challenging multiculturalism. In the UK, the debate is muted and those that do question multiculturalism are usually shouted down as racists. I cannot imagine any British politician being prepared to stick his or her neck out in the defence of western values, in the same way that Ayaan Hirsi Ali has. If anything, New Labour is moving in the opposite direction by legislating against the criticism of oppressive religions and bringing the MCB into government as advisers.

I am glad that I went along on Friday and showed support for this courageous woman. It is encouraging that English Pen, Tim Garton-Ash and the ICA were brave enough to arrange this event. Public figures who are prepared to confront Islam’s challenge to our values are few and far between. In answer to Tim Garton-Ash’s question, I don’t believe that any British TV channel will show Submission in the near future. Our politicians and the senior executives in our broadcasting organisations are too scared. None of them has the courage of Ayaan Hirsi Ali.

In France, though, if you are French, you are French, that’s it. Ethnic minorities have no official status. There is no French equivalent of “African-American”, when you become a French citizen, you are expected to leave your old identity behind. Uniquely among the major western countries, the French government has no idea how many of its citizens are from ethnic minorities. This means that there can be no affirmative action programmes, no government grants for cultural activities and no community leaders filing into government buildings to be consulted on policy.

Over the last week, commentators from both left and right have pronounced that France’s model has failed. The Guardian suggested that France should adopt some features of the British multi-cultural approach, and Niall Ferguson advocated the American system of integrating immigrant groups. The French approach to their ethnic minority communities is being blamed for the lack of pro-active policies to ensure that they are integrated into French society. This leads to the neglect of minority communities, which in turn leads to alienation and violence, or so the story goes.

What short memories we have. Just two months ago, the lawlessness and rampaging mobs in New Orleans were attributed to the failure of the USA to deal with the deep racial divisions in society. Trevor Phillips warned that America is becoming dangerously segregated:

Amongst America’s hyphenated identities, the part of their identity that marks them out as different seems to have become as important, even more important, than the part that binds them together. Americans have all fetched up at the same restaurant; but every group has its own separate table, with its own menu, its own waiters and its own way of paying the bill.

In the UK, there has been rising criticism of multi-culturalism over the past few years year. Conflicts between whites and Pakistanis in Bradford and Oldham and between Afro-Caribbeans and Pakistanis in Birmingham have been blamed on racial segregation and lack of integration. By emphasising the cultural differences, the UK has allowed communities to develop in isolation. Consequently, while they inhabit the same area they often have little understanding of each other.

While Paris was burning, there were also riots in the Danish city of Aarhus. The Dutch too, have problems with alienated Muslim youths. No western country has solved the problem of integrating its ethnic minorities. That is not to say that people from minorities do not integrate into European cultures; many of them do. In all western countries, though, there are groups from ethnic minority backgrounds, sometimes second or third generation, who remain alienated and isolated from the wider society.

The French have one way of managing their cultural minorities, the Americans have another and ours in Britain is different again. The Danish, Dutch and Germans also have their own unique approaches, reflecting their national cultures and histories. All have one factor in common. They have specific cultural minorities who, for one reason or another, remain at odds either with mainstream society, or with other ethnic groups. In this sense, all the approaches can be said to have failed.

The French model is no better or worse than any other. At the moment, it is France’s turn to experience unrest but riots with a racial element will occur again in the UK, in the USA and in Scandinavia. Whatever model a country uses to try and create harmony between ethnic groups, some people remain stubbornly unaffected.