Your say on high pay: The campaign against excessive executive pay

Annie Powell of Fair Pensions writes about the “Your say on high pay” campaign against excessive executive pay.

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By Annie Powell of Fair Pensions

If you were CEO of a company that had, by your own admission, delivered “unacceptable” shareholder returns, would you expect to receive a remuneration package of £17.7m? Probably not, but that is exactly the position in which Bob Diamond finds himself.

Bob-DiamondDiamond’s pay package prompted a shareholder revolt at Barclays’ AGM on Friday with 26.9% of shareholders using their advisory vote to protest against the remuneration report.

As remuneration votes go, this is a significant amount of dissent.

The Barclays AGM results, however, demonstrate the shortcomings of the government’s proposals to introduce a binding simple majority vote as an antidote to excessive pay (as discussed by Duncan Exley on Left Foot Forward, this is in contrast to previous plans to require special majority approval).

If a majority of shareholders are unwilling to use a mere advisory vote against a package as egregious as Diamond’s, making the vote binding is unlikely to provide the entire solution to the executive pay problem.

 


See also:

Vince Cable’s efforts to moderate executive pay under attack 27 Apr 2012

It isn’t ‘anti-business’ to oppose high pay for mediocrity 24 Feb 2012

All in it together? RBS fat cat ‘in line for £7m payout’. Seven. Million 27 Jan 2012

Cable fails to provide a stick or carrot in the fight against obscene pay 24 Jan 2012

Three things Cameron should do if he’s serious about high pay 9 Jan 2012


 

The extent of this problem was highlighted during the recession when executive pay continued to soar while thousands lost their jobs and average wages stagnated. The effect of executive pay on increasing wage inequality in the UK is starkly demonstrated by Chart 1 which shows the percentage increase in CEO and average pay since 1998.

Chart 1:

Percentage-increase-in-CEO-and-average-pay-since-1998
The chart also shows how executive pay has increased out of all proportion to shareholder returns. In 2008/9, for example, FTSE 100 CEOs saw their base pay increase by 10% while the companies they ran lost almost a third of their value.

These inordinate pay packages not only waste money that could otherwise be used to increase dividends, they also compromise the success of the company: if executives are so well rewarded for mediocrity and even failure, there is little financial incentive for them to succeed.

This is bad news for the many of us whose pension pots and savings depend on the performance of FTSE 100 companies.

And herein lies the rub: if it is in shareholders’ interest to vote down excessive pay packages, why aren’t they being voted down more frequently? Part of the answer is that the asset managers who vote on behalf of many pension funds and savers do not properly represent their clients’ interests.

Asset managers are highly conflicted on pay: they are themselves very highly paid, and they often work for the asset management arm of financial conglomerates whose investment banking divisions act for FTSE companies. Voting against high pay would effectively be voting against their companies’ own clients.

To make matters worse, pension funds have been poor in holding their asset managers to account. For this reason, Fair Pensions has launched the Your Say on High Pay campaign to give ordinary savers a voice on executive pay.

Our online action tool allows people to email their pension fund and ISA providers directly; this email requests that the fund or provider asks their asset managers to vote against remuneration reports that contain certain unacceptable components, such as a bonus that exceeds 200% of base salary.

While pension funds and ISA providers are not obliged to act on the instructions of their members or customers, it is hard for them to ignore a groundswell of opinion on investment issues such as this; after all, it’s not their money.

 


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17 Responses to “Your say on high pay: The campaign against excessive executive pay”

  1. Spock

    Your say on high pay: The campaign against excessive executive pay: //t.co/eltEWdfq by Annie Powell of @FairPensions

  2. Usdaw East Cornwall

    Your say on high pay: The campaign against excessive executive pay: //t.co/eltEWdfq by Annie Powell of @FairPensions

  3. CrawleyKeepNHSpublic

    Your say on high pay: The campaign against excessive executive pay: //t.co/eltEWdfq by Annie Powell of @FairPensions

  4. Matthew Butcher

    RT @leftfootfwd: Your say on high pay: The campaign against excessive executive pay //t.co/iXABp8LO

  5. leftlinks

    Left Foot Forward – Your say on high pay: The campaign against excessive executive pay //t.co/W3yz0PbS

  6. ElaineSco

    Left Foot Forward – Your say on high pay: The campaign against excessive executive pay //t.co/W3yz0PbS

  7. Political Planet

    Your say on high pay: The campaign against excessive executive pay: Annie Powell of Fair Pensions writes about t… //t.co/O1K14drv

  8. Anonymous

    Come clean.

    Who is going to pay the taxes that you won’t get if you don’t have excessive pay?

    It’s going to trickle down to the middle class and the poor.

  9. BevR

    RT @leftfootfwd: Your say on high pay: The campaign against excessive executive pay //t.co/cXf9Gg3T

  10. Blarg1987

    Well much executive pay is channelled into offshore accounts and so they pay no tax on it.

    And in all fairness shareholders may pay a little bit more tax on their dividens, but they would get more from their dividens which would be spent in the local economy stimulating jobs and growth for UK buisnesses, rather then luxary items by a few from overseas.

  11. Anonymous

    Ah yes, dribble-down theory. Stuff enough in your fat cat’s mouths and the poor might not starve from what falls out.

    Typical self-serving propaganda.

  12. Anonymous

    The argument being put forward is to cut executive pay. That means less tax. Who takes up the slack?

    Cuts or more taxes on the middle class or poor?

    Corporate tax rates are below income tax plus NI.

  13. Shifting Grounds

    Having your say on high pay //t.co/VMVVdFvz

  14. Shifting Grounds

    Having your say on high pay //t.co/VMVVdFvz @leftfootfwd

  15. cameronsfollys

    Your say on high pay: The campaign against excessive executive pay //t.co/jHP6NrVU

  16. Anonymous

    Ooh, ooh, the people with the wealth who pay vastly less tax than their share.
    Of course the only answers to you are punishment and pain, for idelogical reasons.

    And yes, corporate tax rates are too low in the current situation – you need to raise them to account for corporate tax avoidance (Since your buddies in government refuse to allocate the resources to stop that).

  17. jwabbitesq.

    I believe its already been demonstrated that the marginal tax actually paid on excessive pay is far lower than the tax on the same amount of pay paid to the lower orders. So it seems to me that it is possible to redistribute pay within a company, ideally by linking top pay to average pay, maintain the overall tax take and have enough money left over to improve returns for shareholders

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