The great pay revolt?

Shareholders are expected to rebel against Anglo American chief Mark Cutifani's pay package

Try to imagine this scene. You are lucky enough to still have a job as a middle manager in a large commodity producer. Your family is growing, you want to move to a bigger house and so you pluck up your nerve, go into the chief executives office and ask for a pay rise....

First silence, then hysterical laughter, then a serious chat as he shows you first, a price chart of the commodity you produce and then, the door.

As thought experiments go it's not very far fetched. You could easily imagine this happening in the offices of BP or the miner Anglo American in the past 18 months.

In both cases you could argue that the chief executive was just doing one of the jobs he promised the board he would do - keep down costs. One of the key targets in most senior management remuneration package is keeping a lid on costs.

Every cost that is apart from the cost of management itself - where pay can go up even as profits fall - a lot.

The rationale for pay holding up or even rising as the company loses money is that external factors are to blame for poor performance. The oil price crash wasn't Bob Dudley's fault. The collapse in copper and iron ore prices isn't Anglo CEO Mark Cutifani's fault. They were dealt some dud cards and played them pretty well.

BP shareholders rejected a pay package of almost £14m for chief executive Bob Dudley

That may be true - but surely the fortunes of the company should not have ALMOST ZERO impact on the pay of the boss? Mark Cutifani's pay fell only 10% when the company he runs was the worst performing share in the FTSE 100.

None of this is any of my business anyway - as I'm sure I will be reminded on social media - it is entirely a matter for the shareholders! But 59% voted against the BP award, 53% against pay at Smith and Nephew and we are expecting another major rebellion at Anglo American today.

In each case it won't make a difference. These votes are non-binding allowing the board to pay out regardless. The shareholders have their chance to vote on pay policy every three years and if they don't use that opportunity to contain pay there's no point whingeing later.

The problem is that boards are very good at selling high pay formulas to shareholders. Do we want a high performance company? Hell yeah! Comes the reply. Do we want a top class management team? You bet! Are we a top quartile kind of outfit? Yes! So we're all agreed we'll get ourselves a top quartile CEO? Thus the decision tree grows and a star CEO is plonked on top. When every company does this, pay ratchets up pretty quickly.

Shareholders may be revolting but they only have themselves to blame.