“CDC Group Plc, which is wholly-owned by the Department for International Development (DFID), aims to reduce poverty by investing in the private sector of developing nations. However, the pay at CDC has been allowed to reach eye-watering levels because of DFID’s daydreaming”.

“For example, the Chief Executive of CDC runs a small, publicly-owned company with excellent job security, no need to find cash to invest and little difficulty hanging on to good staff. For this, he was paid close to a million pounds in 2007, roughly the same as a Premier League footballer. Pay levels seem to have been decided on a ‘don’t ask, don’t tell’ basis, with DFID failing to ask about pay and CDC failing to tell, despite established remuneration policy.”

“DFID needs to pay much greater attention to the governance of CDC in future. I am all for rewarding good performance but if CDC cannot prove whether its actions have succeeded in reducing poverty, it is highly questionable whether CDC’s massive salaries are justified.”

Mr Bacon was speaking as the Commons public accounts committee published its report on the Department for International Development’s oversight of CDC Group Plc. CDC Group Plc, which is wholly owned by the Department for International Development (DFID), helps reduce poverty by supporting private sector development. CDC, which has not received any government funding since 1995, does not donate aid but invests equity in private enterprises in developing countries in order to demonstrate to other investors that it is possible to make money in such countries.

The report finds that CDC did not properly consult DFID as required under the agreed remuneration policy and DFID failed to ensure that the governance arrangements worked as intended. As a result, CDC’s remuneration arrangements led to extraordinary levels of pay in a small publicly-owned organisation, with the Chief Executive receiving £970,000 in 2007, a 153 per cent increase since 2003. CDC executives enjoy the security of working in a publicly owned body and do not have to compete for money to invest and, although part of their pay reflects CDC’s market-beating financial results, it also reflects a dubious comparison with private sector ‘fund of funds’ businesses. For DFID, financial performance is the principal indicator of CDC’s development impact, but this information is not sufficient to assess CDC’s effect on poverty reduction. The report finds that CDC has found it challenging to collect and report on its contribution to reducing poverty.

In 2007, the average salary of a footballer in the English Premier League reached £1 million.

30 April 2009
 

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See also:
PAC REPORT: DfID's oversight of CDC Group Plc