UK’s Corbyn suggests linking dividends to fair pay

Jan 28, 2016
<p>Labour Party leader urges companies to pay staff &lsquo;generous living wage&rsquo;</p>

Jeremy Corbyn, leader of the UK’s opposition party, has provoked criticism by calling for companies to be forbidden to pay dividends to investors unless their employees are paid fairly.

At a speech last week, Corbyn touched on a number of proposals for making the country ‘fairer’, including retaining the rights of workers by repealing the Conservatives’ planned trade union reforms and ensuring pay ratios between top and bottom earners remain small.

Also in the Labour leader’s sights are listed companies and the dividends they pay to their investors. ‘Another proposal would be to bar or restrict companies from distributing dividends until they pay all their workers the living wage,’ Corbyn told attendees of the Fabian New Year Conference. ‘Only profitable employers will be paying dividends; if they depend on cheap labor for those profits, I think there is a question over whether that is a business model to which we should be turning a blind eye.’

A number of commenters have criticized Corbyn’s plans, with most pointing to any such measure having a negative impact on investment in British companies.

Matthew Fell, chief of staff at the Confederation of British Industry, says it would be a hard move to condone. ‘The idea of politicians stepping into the relationship between a private company and its shareholders would be a significant intervention, and not one we would support,’ he told the Financial Times.

Though George Osborne, the chancellor, announced a new living wage of £9 ($13) an hour by 2020 for all adults over 25 last summer, many have noted that the increase represents an improved minimum wage instead, rather than a rate that would sustain a reasonable lifestyle.

Corbyn may have certain high-yielding companies in mind for his plans, however: recent research compiled by analysts at French bank Société Générale shows that a large percentage of the FTSE 100’s dividend yield is thanks to just a few high-paying stocks. Indeed, this figure currently stands at the highest rate seen in 25 years.

Companies in the FTSE 100 currently yield around 4 percent on average in dividends, though this is thanks largely to high-yielding firms in the mining or oil sector, whose dividends may be challenged as the firms face increasing environmental and resource-based pressure in the coming years.

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