Are remuneration consultants independent?

The High Pay Centre has questioned the independence of the advice HR and board-level committees receive from remuneration consultants, citing its research showing that a small number of consulting firms (five) account for 85% of fees paid by a sample of companies for remuneration services. Almost all of the companies the Centre surveyed that were buying remuneration services from signatories to an industry code were also employing the same firm to provide other, additional services.

Some companies fail to disclose a fee for each of the firms providing services to the remuneration committee, in apparent direct contravention of a legal requirement to do so, the High Pay Centre argues. More than half the companies in its survey sample used an audit firm to provide remuneration services. Other companies fail to identify all of the firms whose services were relied on for remuneration advice.

Paul Marsland, the author of the report, concludes:

‘Specific changes could be made to UK legislation that make disclosure of all fees paid to remuneration advisory firms mandatory. Given that wholesale changes in this area occurred recently this may remain an aspiration for some time to come, however, nothing prevents adoption of this principle by those companies which seek to shape best practice in this area and demonstrate a practical and valuable commitment to transparency.’
‘Are Remuneration Consultants Independent?’ was published by the High Pay Centre in June 2015. Download the report here:

High Pay Centre writes to Sajid Javid, business secretary, about pay rules

The High Pay Centre letter highlights a 'flaw in the 2013 remuneration reporting regulations'. It calls for 'more clarity about the relationship between companies and the remuneration consultants they use'. You can read the letter, dated 2nd July, here: