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Top bosses’ pay: what’s an elected mayor worth to you?

Top bosses’ pay: what’s an elected mayor worth to you?

🕔06.Feb 2012
EDINBURGH, SCOTLAND - APRIL 19: Stephen Hester...

In a post a few weeks back I suggested that social services could be a ‘make-or-break’ issue for any new elected mayor of Birmingham.

I think there’s another elephant in the room – pay.

After RBS chief executive Stephen Hester was forced by public and political pressure to sacrifice part of his (below market rate) remuneration package, it’s perhaps a good time to start thinking about the pay packet of the mayor, should Birmingham and other cities decide to opt for the change in May.

In the context of the ongoing rows over top bosses’ pay and public sector cuts, the issue of mayoral pay will be toxic if mishandled.

Sir Peter Soulsby, who was elected mayor of Leicester last year, thought he had the answer when he appointed an ‘independent’ commission to review his £50k salary. When the panel said he should get £100k, such was the media and public uproar, Sir Peter kicked the issue well into the long grass, presumably so that he could get on with running the city in peace.

So every new mayoral administration will face a conundrum. Set pay at a level high enough to attract successful organisational leaders from outside politics in order to expand the mayoral gene pool, or impose a token stipend that will restrict the job to the super-rich, the retired or those financially dependent on outside influences such as unions or business interests?

Similar arguments apply to the pay of other senior members of the mayoral team – whether they’re called deputies, department heads or commissioners. Many mayors will want to appoint world leading experts in fields such as transport or social care, and will need to pay the market rate. A mayor might just manage to symbolically forego their own salary, but it could be a big risk to hobble the pay of their ‘dream team’.

Ministers have been as clear on this aspect of Localism and mayors as they have on every other related issue – ie not very clear at all. So it looks like it’s going to be up to individual cities to decide what to pay their mayors.

Where to start? Well, here are some of the arguments we can expect to hear in the coming months:

  1. Birmingham is a £3.5bn turnover organisation and should therefore pay its top person a salary equivalent to a £3.5bn UK company. Handily, Andy Street, chairman of the Greater Birmingham and Solihull Local Enterprise Partnership also runs just such a £3.5bn turnover company – the John Lewis Partnership. In 2008, he received £600k in salary and bonuses, which because of the JLP ethos, is significantly below the packages enjoyed by Mr Street’s peers inside and outside the FTSE350. Would Birmingham voters tolerate an elected mayor getting more than £500k a year?
  2. Elected mayors are likely to replace the role of council chief executives. Birmingham’s Stephen Hughes is paid just over £230k, so pay that to the mayor. Would Birmingham voters tolerate an elected mayor earning more than the prime minister’s £142.5k?
  3. Pay the mayor the equivalent of the council leader they will replace. In Birmingham’s case, this would pitch the mayor’s salary at around £72k. This is around the level of a commercial lawyer, but some way short of a high-flying equity partner.
  4. Pay them at rates equivalent to, say, bosses in regional industry, NHS Trust chief execs, or national union leaders. Senior board level directors would expect to earn £150-200k, not including shares and bonuses. National union leaders are typically on packages of around £120k, and regional NHS chiefs get between £110 and £200k.
  5. Birmingham is a global city, so the mayor’s pay should be similar to that of mayors of si!milar cities around the globe. In London, Boris gets £144k. in Chicago, the mayor earns around the same.
  6. The mayor’s salary should be related to the prosperity of the city. In line with arguments that company bosses’ pay should be pegged at a fixed multiple of the earnings of the lowest paid or average employers, the mayor’s should be related to the wealth of the average citizen. Where do you even start on that one?
  7. Or perhaps the government should define a consistent national mechanism for the pay of mayors, based simply on population size. This would draw some of poison out of the argument of pay- and let the new mayors get on with the day job.

What do you think? Let battle commence!

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