An influential group of City and business leaders has today condemned the current approach to executive pay in UK listed companies as “not fit for purpose”. The Executive Remuneration Working Group has published recommendations to end “remuneration creep”, where pay is driven up because no company wants to be seen to be below average.
Simon Walker, Director General of the IoD, welcomed the report:
“It is increasingly clear that there is a problem with executive pay at big listed companies. The introduction of binding votes on pay policy has not had the kind of immediate and positive impact regulators and government would have wanted. Whilst some improvements have been made, the rebellion over BP’s remuneration report last week has shown that there is still considerable shareholder unhappiness.
“Today’s report is a timely and important intervention in the debate around how remuneration is designed. We are pleased that the report has called for pay-setting to recognise company performance, be clear and simple, and aligned with shareholders’ interests.
“Importantly, the report also recommends that pay policies for senior executives are consistent with the approach for other employees. This is a worthy intervention that, if adopted by the market, could go a long with to restoring trust in our largest companies. The current approach to executive remuneration is failing. We are looking forward to engaging with this worthwhile initiative, and urge FTSE boards to do the same”.