Connected Research

Union policy research in the 21st century

Executives having a good recession

with one comment

Research published today by PIRC and pension fund Railpen highlights the growth in executive remuneration despite the recession. The research is intended to help inform the debate in the US for UK-style shareholder advisory votes on executive remuneration in the US but, as The Guardian report of the publication illustrates, and despite a welcome rise in shareholder rejection of such reports during 2009, shareholder power is exercised all too infrequently in this country.  (This isn’t intended to imply that shareholder votes are not a good idea for the US.) Executive pay amongst FTSE100 companies has still risen by 80% between 2000 and 2008, despite a 30% fall in the FTSE index in that time, while the average vote against executive remuneration reports has actually fallen since hitting a peak in 2004.

This comes on top of The Guardian‘s own research into executive pay levels, published last week, demonstrating a widening gap between executive and staff pay during the recession and reporting that the pay of an average FTSE100 chief executive is worth around 100 school teachers.

Nevertheless, PIRC argues that, even though shareholders need to do more to exert their rights, the introduction of shareholder votes on executive remuneration has:

‘… clearly led to more engagement on remuneration and the shift towards a greater proportion of total rewards being performance-related is evidence of this.’

A thoughtful series of posts by Tom over at labour and capital (see, in particular, here and here) highlights that we have a substantial way to go in fathoming out the issue of remuneration as a driver of executive behaviour and on the notion of the extent to which shareholders really are able to exercise ownership powers. The response of the Institute of Directors to the Walker Report, published today, calling Walker’s proposals on executive bonuses and long-term incentives ‘too prescriptive’, calling instead for a statement of best practice, demonstrates succinctly where the power base lies. In times of a call for a high pay commission, revisited by Compass also last week, and when the G20 will be debating clawbacks on remuneration, at least of bankers’ bonuses should profits fall, the IoD’s simple arrogance in proposing no curbs but a mere code of practice looks out-of-touch and as displaying more than a touch of arrogance.

I remain sympathetic to the notion of a high pay commission as a means of examining the issue and coming up with some serious proposals: addressing in practice the laxity of corporate governance in the area of executive remuneration remains otherwise an issue in need of a strategy.

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Written by Calvin

22/09/2009 at 1:25 pm

One Response

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  1. I argue that reforms are needed because execs have too much power over corp governance. Ironically, the reforms would bring corps closer to the public interest. Anyway, I’ve just posted on it. If you are interested, you might check out the following: http://skipworden.wordpress.com/2009/10/24/corporate-partisanship-eclipsing-the-public-interest/

    euandus

    24/10/2009 at 7:47 pm


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