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Inexcess Earnings

Tuesday, December 9th, 2008 Inexcess Earnings

It has emerged that the head of a government owned body the Colonial Development Corporation (CDC) Group that tackles poverty in third world Countries earned £970,000 based on an “exceptional performance” for 2007 with reference to a BBC report (05 12 08).

However, Edward Leigh, chairman of the MPs’ committee which monitors public spending, described it as an “insult”. CDC is publicly owned but has not received government monies since 1995. Leigh argues that CDC head and other managers have more than received adequate pay. CDC was founded in 1948 and is responsible for channelling investment into many of the world’s poorest countries by supporting promising and growing businesses there.

The National Audit Office (NAO) in relation to CDC’s performance state that it had “exceeded” financial targets set in 2004. Alas there was also cause for concen surrounding the Department of International Development’s (DFID) oversight of the company on issues such as executive pay and reporting of performance targets. Pay packets well exceeded levels that had been set in 2004. Mr Laing’s pay went up from £383,000 in 2004 to £970,000 last year while average remuneration for senior executives was £435,000 in 2007. Leigh also states that some of the managers were achieving twice as much remuneration as that originally set in 2004.

Other concerns were based around the issue of £1.4bn that appeared to finance business in not the poorest of countries as intended ie China and South Africa. Notably, Leigh is critical of the staff performance bonus as this was not a private company. Moreover, the bonus structure seems to have been created to deliberately reward financial achievement. Thus the ethical decision making processes comes to mind.

Edward Leigh argues “I think that paying an income of nearly £1m to somebody who works in an entirely publicly-owned company is an insult to the millions of people living on $1 a day, and the tens of thousands of charity workers who are slaving away on tiny salaries.”

More worrying and alarming was that the NAO identified that the companies cash reserves were actually larger than the general level of investment. The CDC have conceded that they will have to amend this flaw.

Tim Burr from the NAO says that “CDC will have made a credible contribution to economic development in these countries,” said Tim Burr, head of the National Audit Office. “But the scale of that contribution, or the direct effect on poverty reduction for poor people, is harder to demonstrate. DFID needs better evidence on the scale of CDC’s impact.”

Notwithstanding, Andrew Mitchell the shadow international development spokesman adds “It is deeply worrying DFID is failing to demand real evidence of the impact of CDC in reducing poverty and that it failed to keep tabs on executive pay. It has been claimed that CDC will now look more closely at the NAO’s findings and act accordingly.

Douglas Alexander the International Development Secretary defends CDC when he says “In the first instance we need to recognise that this is an organisation that was worth a billion pounds and that is now worth £2.7 billion. So we have seen significant growth and it has not received a penny of public money since the mid-1990s.”

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