The CBI’s guidelines on ‘best practice for business’ during the pandemic tell the 1,500 larger companies that make up the lobby group’s core membership to prioritise employee welfare while also asking ‘how can we help’ government and society to manage the crisis. So far so good. But the notes don’t say ‘Consider a temporary cut in senior executive salaries’. And that is what I think they should all be doing, sooner rather than later, both as a gesture of immediate solidarity and as a move to avert a longer-term backlash against wealth, privilege and the pillars of capitalism.
The trend has already begun in the all-but-grounded airline sector. Willie Walsh, chief executive of British Airways’ parent IAG who is approaching retirement, is taking a 20 per cent salary cut for the remainder of his contract — though his pilots face losing 50 per cent. Shai Weiss, who runs Virgin Atlantic, is also giving up 20 per cent. Across the pond, the respected industry leader Ed Bastian of Delta says he will take no salary for six months. As I said last week, airlines are by no means uniquely afflicted: this would be a good moment for leaders of many industries where job losses loom to follow Bastian’s lead.
But salary is only a part of any top executive’s package, the rest being bonuses related to performance and share price — and many of those awards will be wiped out by market falls and operating losses. Boardrooms that start widening the goalposts of bonus calculation will be tempting fate, however, as will bosses who seek to re-define ‘-performance’ in terms of how much of their business they are able to save — and demand high rewards for doing so.
The executive class is far more likely than the rest of the population to have savings and well-funded pension pots to fall back on, and the argument that token pay cuts at the top of the tree won’t save jobs lower down is, at this stage, wholly irrelevant. There will be a new scale of values at the end of this, and a bitter public mood. Sacrifice now is sensible insurance.
More, Philip Coggan’s highly readable new history of the world economy, offers a handy summary of the economic effects of the Black Death — with which, I hasten to add, I’m not striving for epidemiological comparison. Spread partly by growing trade between Asia and Europe, its death toll in 1348-9 was colossal but, for those who survived, ‘the effects were actually quite positive’. Rents fell and wages rose, though prices rose too; the gap between skilled and unskilled wages narrowed; workers began to enjoy a better diet; serfdom, already declining in western Europe, largely came to an end.
The Stanford-based historian Walter Scheidel, quoted by Coggan, has written of the Black Death as an example of shocks to society that lead to reductions in in-equality. I commend also a paper called The Economic Effects of the 1918 Influenza Epidemic by Elizabeth Brainerd and Mark Siegler (2002): in that terrible episode, the spread was partly caused by troop movements at the end of the first world war, and deaths occurred particularly among men of working age, so no wonder wages rose in the short term. But in their analysis of available US data, the authors also found ‘a large and robust positive effect of the influenza epidemic on per capita income growth’ over the following decade.
Of course the world of 2020 is utterly different from 1918, let alone 1349; still, these examples might help us see beyond short-term panic, suggesting silver linings of a sort. We should brace for inflation, but also for real wage increases at the bottom of the scale, probably boosted by universal basic income schemes. We should expect much greater pressure on governments to address perceived inequalities — and when the rescue cost has been totted up, that will probably mean wealth taxes. We should expect large parts of the economy to be under state control, led by aviation and rail, and some essential goods to be rationed. The new normal will be a form of socialism, even under Conservative leaders. All the more reason for boardrooms to heed my advice above.
I wonder how many investors had the prescience to back Zoom Video Communications of San Jose, California, in response to early reports from China of the coronavirus outbreak. Capable of hosting virtual meetings of up to 100 participants, this classic tech start-up’s product is now the medium of choice — my Malibu correspondent tells me — for yoga and meditation groups as well as university classes, and ‘it would be embarrassing if you haven’t been invited to at least one Zoom cocktail party by now’. Floated at $36 in April last year, the shares have soared from $69 to $130 since the start of 2020. A bit late to buy now, perhaps, but good to find one price chart that’s pointing upwards.
Innovators, we need you
It was wise of the Financial Conduct Authority to tell listed companies not to report financial results that were due to be published in the coming weeks. More than 50 companies poised to do so were no doubt also agonising over what on earth to say about trading prospects in a shutdown with no end date. I’m heartened, on the other hand, that The Spectator’s search for the UK’s finest entrepreneurs — now renamed ‘Economic Innovators’, our previous buzz-word ‘Disruptor’ having gone out of fashion for obvious reasons — is still looking ahead to its own results announcement in November. And I was hugely cheered by talking to last year’s overall winner, Priya Lakhani of the edutech venture Century, who is offering free online teaching programmes to all parents and pupils during the school closures. As I’ve said, entrepreneurs will have a huge role to play in post-virus recovery. Meanwhile, if you spot new ventures doing wonderful things, send me their names (email@example.com) and I’ll encourage them to enter our Awards.