As the boardroom gives itself another generous pay rise, when will companies be forced to tell the full story when it comes to remuneration?
The revelations that Willis increased director pay 9% while staff wages were frozen comes at a time when the government is heavily focused on boardroom pay.
Figures released today by employment specialists Incomes Data Service showed that the pay of blue chip directors swelled by 49% in a year.
The figures are likely to bring more urgency to business secretary Vince Cable’s plans to curtail boardroom remuneration. In September, he launched a consultation on reporting requirements and how companies can give more clarity on the issues.
It is clear that there is gathering momentum on the issue and that change is afoot. The end result is likely to require insurers and brokers, along with other firms, to publish clear details on why exactly directors are awarded rises in pay and bonuses.
That will make it easier for shareholders and the media to scrutinise remuneration. The second result is that shareholders are likely to become more active in voting on directors’ pay.
In the past, shareholders have actively approved the large pay rises. The big difference is that with the economy stalling, and hence financial results coming under more pressure, in addition to more transparent reporting of remuneration, shareholders are likely to have a much greater say in awards.
And that means an end to rewards for failure.
The ABI has been very active in calling for boardroom pay restraint. Last month, it said members should “support appropriate reward for exceptional performance”, but they should “strongly resist any payment for failure”.
With some much political pressure and popular support, the ABI will surely get its wish.
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