EXECUTIVE PAY
Political parties battle to curb executive wage militancy
The three main political parties have all pledged to crack down on inflation-busting boardroom pay rises, as Vince Cable, the Business Secretary, prepares to force through new government rules to end a long-running and bitter dispute over executive remuneration.
According to one recent study, average total CEO remuneration rocketed by 33% to £5.1 million in 2010-11.
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Here we chronicle the key bargaining developments in this latest wave of wage militancy on the executive shopfloor.
18 January 2012
Fidelity Worldwide Investment, one of the biggest investors in the stock market, backs government's plans to give shareholders binding votes on executive pay and bonus packages. Dominic Rossi, chief investment officer of equities, says more transparency is needed on executive pay.
16 January 2012
Deputy Prime Minister Nick Clegg promises to introduce binding shareholder votes to curb executive pay as part of a package of measures to moderate boardroom behaviour. He says: “Our economy is now seriously out of whack. It simply cannot be right that, right now, because of the crash and the recession, millions of ordinary people are struggling to get by. Yet relatively little has changed for those at the top. It cannot be right that for most people, on average, wages are falling by around 3% a year, yet executive pay is rising – on average by 13%. Over the last 25 years, top chief exec pay has shot up by 1,200%. That is a gross imbalance, with wealth and influence hoarded among the few. It’s socially destabilising. Morally, it cannot be justified. And it’s bad for the economy too.”
12 January 2012
Chuka Umunna, Labour’s Shadow Business Secretary, calls for High Pay Commission proposals to be implemented in full. He says: “The High Pay Commission has put forward a tranche of recommendations to increase transparency, accountability and fairness. The recommendations enjoy support in the business community and are in line with measures implemented in the U.S., Germany and other countries to address these issues. We support them too.”
10 January 2012
Labour leader Ed Miliband calls for employees to be put on remuneration committees. He says: “We have to end the situation where we have rewards for failure at the top - harming the company and its workforce. That is why we need real change. Like an employee on every remuneration committee so that top executives have to look an ordinary member of staff in the eye before they award themselves a pay rise.”
8 January 2012
Prime Minister David Cameron promises shareholders a binding vote on executive pay, in an effort to deal with excessive salaries. Cameron says that "excessive" bonuses made "people's blood boil", adding: "Government can't tell people what they should be paid but [should act] where you've got a market failure".
25 November 2011
The Institute of Directors publishes its response to the Department for Business’s consultation on executive remuneration. It says: “The IoD has noted, with growing concern, the rapid rise in executive remuneration at the largest listed UK companies over the last 10-15 years. We are aware of the difficult challenges faced by remuneration committees in responding to a global market for executive talent. But the current pace of increase in executive pay is unsustainable. The legitimacy of UK business in the eyes of wider society is significantly damaged by pay packages that are not clearly linked to company performance.”
22 November 2011
1. Pay basic salaries to company executives.
2. Publish the top ten executive pay packages outside the boardroom.
3. Standardise remuneration reports.
4. Require fund managers and investors to disclose how they vote on remuneration.
5. Include employee representation on remuneration committees.
6. All publicly listed companies should publish a distribution statement.
7. Shareholders should cast forward-looking advisory votes on remuneration reports.
8. Improve investment in the talent pipeline.
9. Advertise non-executive positions publicly.
10. Reduce conflicts of interest of remuneration consultants.
11. All publicly listed companies should produce fair pay reports.
12. Establish a permanent body to monitor high pay.
19 September 2011
Investors will have greater clarity on how executive pay is matched to performance under proposals published by the Business Secretary, Vince Cable. The proposals, issued as part of a consultation paper, will “simplify the reporting requirements for companies, providing clear and relevant information to investors on performance and pay”. They will also “increase transparency and accountability”.