thre FT has been examining the socialist credentials of investment banks, where employee remuneration (or labour) continues to triumph over income to shareholders (or global capital).
Iin this context comes a new report from Citi bank yesterday, warning that Jeremy Corbyn will be as bad for banks' profitability as a hard Brexit. However;
Corbyn is ideologically opposed to high banker pay. In this respect, he's allied with the forces of global investment against the extractive capacity of the labour-bureaucracy. (See the recent investor rebellion at Standard Chartered over one individual’s pension remuneration, for example)
Investors who own equity might welcome Labour’s plans for an extra levy on “excessive pay”, one of the issues Citi cites in its note, alongside higher income taxes. If taxes rise enough, managers will have a choice: pass earnings to the government, or cut wages and, depending on corporate tax rates, pass them to shareholders. Given the decision-makers own shares, you’d think they’d choose the latter.
If returns accrue to equity instead of wages, (a practical issue with Corbyn's suggestion to introduce a maximum pay law), then the value of equity rises.
Join the discussion